How to Handle Trading Losses

Let’s talk about how to handle trading losses.

The cryptocurrency market, like any other market in the world, is volatile. And investors that are involved in the market have, at one point or the other, faced large losses. The reason for the losses can be and are of multifold. However, in essence they are all the same; money is lost.

In the cryptocurrency market in specific, the reason can be anything from technology shortcomings to general speculation caused volatility. One of the major reasons for trading losses in the cryptocurrency market especially is lack of discipline or blatant overconfidence.

Irrespective of the reason, getting over losing a lot of money is a whole different ball-game. It can be one of the most challenging times in the life of a trader and sometimes have catastrophic consequences.

If you are someone who is going through that right now or has gone through it and is recovering, here are a few things to keep in mind.

Slow Down

You’ve just lost a large amount of your trading capital in a bad trade. You’re reeling from the aftereffects and you want to make enough money through your investments to equalize your trading losses.

While this is a very emotional time, it is important for you to remain calm. Yes you have lost a part of your investment and yes you have lost money, but that is all the more reason to slow down. Control your impulses at this time, don’t make rash and hasty trades because you may just end up worsening your situation.

Remember that every trader has bad days and everyone loses money in financial markets. And it is okay, if not imperative, to stop trading at that point. Take account of your trading losses and make no more trades for the day.

Slow down, cope and recuperate.

It Happens

You may have just had a bad day. You took some bad decisions and made some unfortunate trades, but it is not the end of the world. You can always recover your trading losses another day.

Accept responsibility for your loss. See how badly you are affected by it and if it is irreparable damage to your finances; call it quits. If you are trading with unexpendable income, stop right there. Your situation could get worse with emotional trades and you could end up a lot worse than you already are.

Take a Break

When at the edge of a huge loss, don’t trade. Take a few day off from the market. Do something else. Spend that extra time coping with your loss, but do not make anymore trades.

Take some time off. It is very important to get some perspective and deal with the emotions you are feeling. While dealing with them, also understand why what happened. And taking a break from trading for a couple of days will give you time to do this.

Analyze

If you are faced with a large loss at hand, obviously somewhere something went wrong. And there is something you could have done about it to avoid the entire situation. In such cases, take a breath and analyse what has happened.

Identify where you faltered and make sure you document your mistakes. By doing so you make sure that you won’t repeat your mistakes and you will also understand the market a lot better for future trades.

This step is crucial to every trader in any market. By understanding where you went wrong, you understand your limitations, the false pretense on which you made your decision and you can ensure that you never do it again.

Don’t Follow the Crowd

One of the most apparent reasons for losses in the market is speculation driven trades. One person on some corner of the internet talks about making thousands in hours and is supported by another who claims to have done the same. You reading that, attempt to do the same.

This is one of the worst mistakes a trader can make in the market. It is very important to remember that just because it worked for someone doesn’t mean it will work for you. Make your trades based on your strengths, limitations and preferences.

Do not follow the crowd and if you already have, strive not to do it again.

Keep Your Faith

At the end of the day, the market is going to work in your favour one day and not the next. Losing a lot of money can and is extremely disheartening, but that does not mean you lose faith in your trading skills.

Everyone goes through losses and bad days when they make trades they’re better off without. Don’t let that shake your faith. When you’re ready to trade again, do not make trades based on your fear and do not let that fear drive you. While it is advisable to be a little conservative in your trades, you do not have to be over-cautious with yourself just because you lost money.

Start Again

When the time comes, when you feel ready again, trade again. At this point you know what went wrong, what caused your loss, why you lost money and how not to be in or put yourself in that situation again.

It is normal to be afraid of trading again, but that does not mean you should let it drive you. Hold your head high and start again. Make small trades and build your confidence up again.

Start with small trades, take one step at a time until you find your groove once more. Remember that losses and gains are part and parcel of the cryptocurrency market and every trader must bounce back from losses.

Conclusion

Losses happen, money is lost but money is made as well. The cryptocurrency market is as demanding as it is rewarding and not everyone is lucky enough to be making profit all the time. It is okay to lose money and it is normal.

And though it can be disheartening to the point of no reproach, don’t let that stop you from bouncing back. Take the loss of trading capital and learn your lesson from it. And most importantly, trade again.