There are many skills one must learn to become a successful forex trader.
But, there is one skill every trader should master to succeed in this business.
Accept trading loss.
You could have the best trading system in the world, know all the candlestick patterns there are, keep a trading journal with military discipline but still loose when you refuse to accept trading loss.
So, if you lack the courage to take a loss, soon you will be sweating and praying for the market and the gods to turn your running losses to profits.
Ask any trader who has said those prayers what happens eventually.
If you are to hone and master the skill of accepting trading loss, you need to understand why traders struggle with trading loss in the first place.
Two reasons why traders struggle to accept trading loss.
1. They fear to lose money.
If we looked at the struggle to accept trading loss from face value, it is because traders fear to lose money.
You do all your planning, enter a trade, say, it goes in your favor, and suddenly it turns red.
What does a typical trader do?
They move or remove the stop loss – if they had it in the first place. Why? Because it is painful to close a losing trade.
At the back of their minds, they are convinced that their analysis of the direction of the market can’t be wrong, it is just market makers hunting stop losses, and pretty soon, the candles will reverse and print in their direction.
Sometimes, they get lucky. But when they are not, the negative trade can go and go and may never come back to profit.
Why would a sober trader leave a trade run deep into losses if they didn’t fear losing the money in the first place?
2. They trade with money they cannot afford to lose.
When a trader funds a trading account with rent money, borrowed money, any money they cannot loose.
They manage to create for themselves a challenge to first, make money to cover the lender or pay the bills, and second, turn a profit for themselves.
This challenge will create emotional pressure to not lose because you imagine all the bad things that will happen if you lose the money.
What our novice trader will do when faced with a losing trade is break all the damn rules and refuse to close the losing trade because he just can’t afford to lose the money.
What they don’t seem to realize is by not accepting to lose, you lose. Often big.
How to master the skill to accept trading loss.
To make accepting losing trades less dreadful until you become indifferent to loss requires a change of your mental structure about loss.
You blow an account only by refusing to accept a small loss.
You make money by maintaining an imbalance of wins over losses.
To accept those foundational truths, you need to reorient yourself with the psychology of trading.
Trading is more of a mind game than the mechanical aspects of reading charts or the fundamental geopolitical factors that move markets.
You can only learn to accept trading loss when you are convinced that you can’t learn enough about trading to control the markets. It goes where it goes.
What you can do, is build up the necessary trading skills like technical analysis, reading price action, then create a trading strategy that leads to an edge where over a certain number of trades your wins make up for the losses.
Resources on Trading Psychology.
Here are some resources to help you with trading psychology – the foundation to mastering the skill to accept trading loss.
Brett Steenbarger’s Trading Psychology Resource Center
Conclusion.
Trading forex and any other leveraged products (Cryptos, CFDs, Options, Stocks, Commodities) are not as easy as advertised.
The markets are brutal. Every trader out there wants your money, the same way you want their money.
You can only succeed as a trader if you are humble enough to take small losses because you are guaranteed the big wins will eventually cover for the losses.
