5 Lessons to Learn From Losing Your Money

ByJoseph CK Chua

Expert Author Joseph CK Chua

While losing a great amount of cash in forex trade is no one's joy, this will actually provides an opportunity for you to learn several important things. If this has happened to you, you may want to look at the positive side and enjoy these hidden but tangible benefits:

1. Learn what went wrong: If you lose anything more than 10% of your investment then it means that there are some terrible mistakes you must have made. Perhaps that should give you an opportunity to learn what went wrong so that you can avoid going that way again. You may want to step back briefly and review among other things:

§ What motivated you to enter the trade

§ The reasons you exited that particular trade

§ Things you believe you should have done differently

The advantage of analyzing your failure is that you will definitely learn to do things differently as you proceed with your business.

2. Review your reasons for entering trade: Failure gives you an opportunity to review your motivation for entering the trade in the first place. Perhaps you entered the trade in the spur of the moment as a result your emotions. If you think that you did everything according to everything you knew best, it could be possible that you were impatient or perhaps you need to learn more strategies. It is always important to keep a journal on your trading pattern by recording information such as:

§ The time, type and size of trades that you enter including stop-loss limit orders

§ Reasons why you have entered a particular trade

§ The time as well as the price of your exit as well as any loss of profit you have made

3. Learn your reasons for exiting the trade: There are many forex traders who have good reasons for entering a trade but surprisingly they cannot give you a proper reason for exiting the trade when they do. Normally, the number one reason why anyone should exit a trade is because they have made a profit that they intend to keep in their account. However, you could also exit a trade because you realize that are not going as they ought to go and you must do something about it. It is always important for you as a trader to develop and advance plan on what you are going to do with those trades that go the opposite direction. You may want to address important issues such as:

§ How far you are willing to go with any trade that goes down south. Perhaps you have a stop-loss order that is too wide or you probably ignored it.

§ The criteria you used to determine that this sale is not a proper idea and what signals prompted you to determine it was time to exit.

§ The criteria you will employ to raise or lower the stop-loss order that was in place.

4. What you are going to do differently: It is important to take time to learn what things you are going to do in a different manner than you previously did. You may want to talk to a friend or colleague who is more enlightened on matters of forex trading. You may want to learn whether it would have been prudent to avoid the trade altogether or you should have perhaps waited fro much longer before you closed the deal. After you have made a decision, you may want to talk to your mentor or any other professional who can assist you to double-check your decision to make sure that it will not lead you to a similar situation. You may also want to set a different set of goals and get a person who will keep you accountable to them.

5. Get a second opportunity: After you have done your review, you can shore yourself up to take a second stab at the forex trade with the knowledge you will have gained. Promise yourself not to make the same mistake again and take time to complete a fresh trading plan. Commit yourself to carry out the plan and channel your anger towards implementing the new goals you will have set.

Find out more about trading psychology and learn how forex trading success can be more about your mindset and less about the markets.