How to Deal With Losses

A Complete Guide

By GBP Trades

Introduction

Dealing with losses is undoubtedly one of the biggest mental challenges in

trading. It can shatter confidence and lead to emotional short term decisions.

So, how does a trader improve at dealing with these losses?

Here I will present my own personal solutions to this issue.

In this short E-Book we will go over:

Probabilities and accepting what this means

Moving on from a loss and seeing the bigger picture
Having confidence and self-belief

Probabilities and Accepting What This Means

The first part of accepting losses, is coming to the conclusion that trading is not
a game of winning. It is a game of probabilities.

What does this mean?

No matter what strategy you use, you will experience many losses. No one
strategy wins 100% of the time.

Even if your strategy has a high win rate (anything over 70%) you will experience
losses. So, you need to be prepared for them. Accepting this idea means that,
before you even place the trade, you accept and understand that there is a
possibility that you lose this trade. No matter how good you believe the setup to
be.

I take it to the extreme, as soon as I begin to look at the charts, I almost already
accept a loss. Now in my own friend groups, my trader friends often laugh at me
for this and question why I do this, but let me explain. If I turn up to the charts
accepting a loss, I am happy risking less, I am more patient in waiting for a better
setup and I am happy to not trade if there is no great setup. I don’t see any
negatives in there. This also helps after I place my trade. I never over-trade, it’s
impossible for me to blow and account this way and I feel next to no emotions
when I am in a trade (I even often forget that I am in a trade at times, I need to
set reminders on my Trading View to remind me).

So, when I do lose, I honestly couldn’t care less, because I already knew that this
was a real possibility. So, it doesn’t really surprise me in the slightest.

Realising that no matter how good you think your strategy is, you WILL lose
trades, it is just a fact. So accepting this before placing a trade, is a great mental
practice for not feeling any emotional attachment to losing.

Moving on From a Loss

So now that we have touched on accepting probabilities, lets talk about moving
on from losses.

WARNING: What I am about to say is very out there and may be a touchy subject
for some of you, and it even freaks me out. But, it gives some amazing
perspective.

I am going to start this heavy hitting section off with a quote from Alex Hormozi:
“If you zoom out far enough, you can’t even see the earth.”

Some of you may understand what I am trying to say right away here and some
of you may not have a clue, so let me explain.

When you lose and get frustrated, you are telling yourself that losing one trade
on a random Monday morning is a problem. If you could zoom out of your body
at that moment, and see everyone in the world's problem that Monday morning,
you would thank your lucky stars.

Again, to say this with another quote: “If everyone put their problems in a pile,
you would take your problem back and run.”

And it is so true, you are creating this problem out of nothing. You know for a
fact that no one wins 100% of the time. So, where exactly is the problem?

Now that we know that losing is not that big of a deal, lets try to use these
losses to our advantage. How can we make these losses a good thing?

So, first I will state the obvious: we can learn from them. This is exactly why i
have the trade review channel. Whether it makes you feel good or not, losing in
trading, especially at the start, is brilliant for you! Now that you know how to
accept it. Learning from losses can show you if there were any technical
mistakes that you made whilst placing that trade. Reviewing it by yourself, or
with me can really speed up that learning process.

Sometimes though, a loss is unpreventable and you have to be fine with that (as
stated before). There will be trades that you have lost that when you go to
review them, there wasn’t much more that you could have done and that is also
great!
Remember, nothing happens 100% of the time, no matter how good you think
your strategy is, you WILL lose a lot of trades, I promise you that. All that you
have to do here is, stop staring at your daily profit and loss, but instead look at
your yearly one.

ZOOM OUT.

I have made this same tweet about 5 times now, my followers must be sick of it,
but all of my tweets are actually lessons to my past self. And this is what he
needed to hear:

“It is better to lose a trade, by following your rules,

Than win by breaking them.”

Having Confidence and Self Belief

Having a level of self confidence is key to accepting losses also. Your ability to
deal with a loss often directly correlates to your belief in your trading abilities.
Note that I said self belief and confidence, I did not say ego. Self belief and
confidence are earned, ego is not.

So, how does this actually improve your ability to lose?

When you believe in your trading system, when you have put in so many hours
of backtesting, forward testing and actually trading with it, you develop a level
of trust in it. All of these hours spent, proving to yourself that it works builds up
this self belief.
Now that you have put the time in necessary to build this up, you are
comfortable losing, because you know very well, that over a larger time period,
this one loss will be insignificant. If you stop focusing on the ego driven daily
profit and loss, but instead allow yourself to build confidence in your trading by
viewing a more accurate time frame such as your monthly, or even better yearly
time frame.

But remember, confidence in trading is NOT thinking that you will win every
trade (that’s ego), confidence is knowing that in the long run, this loss will be
insignificant to you.

Conclusion

In this E-book we went over many aspects of improving your ability to lose. A
few last important notes that I have are this: When you do lose, do not get angry
with yourself. Firstly, you should not be emotional anyway, but also, every trader
ever has had losses that they don’t think they should have lost. That isn’t just
trading that is life.

Instead of thinking: “How did I lose this? Why did this happen to me?”

Think: “How can I use this loss to my advantage.”

We can only play the cards that we are dealt, so make the most of them.