Losing Money Trading for The First Time? - How to Overcome The Shock

Last Updated July 23rd 2021
9 Min Read

Let’s start by making one thing clear: there’s no single trader who has never made a loss throughout their career. Whether it was because of lack of education, technology meltdown, lack of discipline or emotional intelligence, wrong series of decisions or simply bad luck, every trader will eventually experience a loss or even several. 

It’s undoubtedly an unpleasant experience that will leave any trader shocked and very disappointed, especially if they performed well with a demo account

Many traders even quit the forex market because they lost money. That’s why it’s very important to know how to deal with losing money and bounce back after a big loss.

It’s important to talk about this issue because experiencing a big loss can make you question yourself. Questioning yourself, career choices and level of understanding can lead to quitting, skipping trades because of fear of losing or getting into more trades than you should to try and get your money back.

Bouncing back after a big loss is not that difficult. There are several steps you can take to make things better for you. Of course, those steps can’t turn back time and give you your money back. However, they can help with repairing the mental damage done, especially to your confidence. 

Let’s get started on our tips for overcoming the shock after losing money trading for the first time

Change your mindset about mistakes

change your mindset, losing money trading

We all make mistakes. Whether it’s related to our career or personal life, your choices can’t always be perfect or the right ones. We are humans, after all. Look at the big picture here; be a bigger person than your mistakes. 

Many people fall victim to their mistakes, thinking that their failure will define their lives and haunt them till the end of time. It’s not true and the faster you push all these negative thoughts away, the better. 

Adjusting your mindset about mistakes in trading will do nothing but help you overcome them as fast as possible and focus on the future. Eliminate the fear of making the same mistakes and try not to freeze every time you sit in front of a computer and start looking at the charts. We know it might be hard, especially the first few times you make a mistake and lose money but if you decided to become a trader with the idea that you will never make a single wrong move and will become a millionaire in no time, then trading is probably not for you. 

Analyse your mistake and learn from it

analyse your mistake, losing money trading

This is probably the best advice anyone can give you on how to overcome the shock after losing money trading for the first time. Simply put, accept that you made a mistake, take your time to deal with the shock and stress and come back to analyse what you did wrong and how can you improve it next time. 

Start with your strategy. Are you sure you did everything right? Is there a way to improve it? How about adopting a new one? 

For beginner traders doing this is an absolute must but it’s valid for experienced traders as well. Though, experienced traders will more easily identify their mistakes and bounce back quicker because they’ve experienced losses more times and are used to this idea. 

Newbie traders should make a habit of keeping a trading journal. Write down what you possibly did wrong, what you thought you did right, how it made you feel and what meaningful conclusions can you draw from the whole experience. 

What’s in the past stays in the past

This is a philosophy that will help you a lot, especially in your trading career. In an environment where things can change in a blink of an eye and where risk is everywhere, you have to learn how to be strong-minded, eliminate emotions and not dwell on the past. 

Can you turn back time? No. 

Can you hop in a time machine, quickly fix your error and win your money back? No.

How you dust yourself off and move on is what counts. 

How to avoid making mistakes in the future?

how to avoid making mistakes, losing money trading

How to overcome the shock from losing money trading? Substitute the initial shock with determination. Start thinking about the future and how to become a better trader. You obviously did something wrong, didn’t make the right call and lost some money. The world doesn’t end here. On the contrary, your growth as a professional has just begun.

What you can do is refresh your knowledge and start learning new things. Be honest with yourself and your forex trading knowledge. Did you fail because you didn’t take a proper forex trading education? If so, we can help!

We, at Trading Education, are now offering our forex trading course, “The Ultimate Guide to Forex Trading” for free to anyone who is serious about becoming a pro. 

We are offering it for free thanks to our partner brokers who want to make sure there are more talented and confident traders out there who don’t give up after the first mistake. We all know that the key to being confident and developing your talents is education

Our course covers the following topics:

  • Foundation in FOREX Trading
  • Mechanics of FOREX Trading
  • Advanced Analysis FOREX Trading
  • Strategy Trading for FOREX Trading

Back to trading after the loss

trading after the loss

Sooner or later you have to start trading. The quicker you recover from your first losses as a beginner trader, the better. 

After a losing streak, start small and be extra cautious. Don’t jump back to the same position size you were trading before. 

Basically, you’re trying to win your confidence back. Having a winning day with a small position size will help you do that. You can increase your position size in the following day. 

What we’re trying to say is to go back into trading at a slow pace. Increase your position size when you have winning days. We get that it might be frustrating to start with small position size after you have traded bigger position sizes but it's better to be safe than sorry, right? 

If the initial loss was too big and you feel beaten up, it’s essential to spend at least 1-2 days to recharge, take a moment to rest and come back stronger. 

Don’t rush back into trading after a big loss! 

You have to feel ready mentally, strategically and financially. 

You will only lose more, repeat the cycle and never recover. 

One last thing: bouncing back after a loss is not about making your money back as quickly as possible. It’s about getting back to basics, implementing your strategies better and building experience. 

When you start building your confidence again, the money will come. 

Final thoughts: 

Seeing that big red arrow pointing downwards can hurt, we get it. 

You were probably prepared to an extent but the consequences were probably way more severe than you expected them to be. 

It's like a big maths exam you've studied for and were convinced you understand the concept, but completely freeze when you see the complexity of the example given to be solved. You know how to solve it, but somehow forget where to start.

Every trader, especially the newbies, has come face to face with this situation and has experienced what it is like to have not just your expectations, but your self-esteem as a person and a professional crushed. 

That’s why we’ve prepared this little guide for you with the hopes of changing the way you see yourself after making a mistake. 

Ultimately, trading is all about experience. There are very few trading legends without at least 10+ years in the industry and below the age of 40. It's like taking your first steps into adulthood, where things get more fun the older you get, because you've seen everything and history tends to repeat itself.

One important thing to remember about this case is don't place a lot of money on a few trades. In the beginning, you're not there to make money, you need a lot of money for that. In the beginning you're in the game to learn.

Once you make, let’s say, 10 consecutive days of positive returns, only then think of raising the bar. Remember, things might seem scary now, because you don't know what to expect, but time will put everything in its place. Just like in life.

Gain, at the beginning you're not there for the money, but to learn. Everytime you win or lose, get something out of it. It will help you progress as a person and as a professional.  

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