We have all had bad trades. We are sure that we are not the only traders that have suffered some grief from a trade that went wrong. At least in the beginning of our trading careers before we gained control of our emotions and learn to follow our trading rules. The following is an attempt to go through the stages of grief as it relates to trading.
Our Opinion on HOW Grief Relates to Trading
Bargaining In the Bargaining stage we might think things like, I will follow the rules just let this trade go in my direction. I will trade fewer lots and use good money management techniques.
Anger When you become Angry, you get the, I will show you attitude. You try to get even with the market maybe you add on to the trade in the wrong direction. Enter larger lot sized in the same direction you were going before which compounds the problem. You might move your stop loss out further if you ever had one to start with.
Denial In the Denial stage we take on the wait and see mentality. We tell ourselves things like, the market will turn around, I can handle the draw down, I should put a hedge on that will save me, and I can add more money to the account to save the trade.
Depression The depression stage. You can only see the problem with the current trade. You have a hard time seeing which way the market is moving and you can’t even read your indicators. Things stop making sense and you are very confused.
Acceptance The Acceptance stage. This is where you put on a hedge. You have accepted the loss in your mind but not in your heart and you are willing to live with the trade. You do feel a little better but you still do not see the rest of the market thus you miss out on many good trades. Even though you will continue to lose on the trade because of the swap you keep it open. You may even make a few trades to make up for the swap but you are not getting ahead just nursing a losing trade.
To truly get over a bad trade you need to close it and get on with life. As long as you hold on to the trade you are preventing yourself from growing and making money in the currency market. Your vision will always remain clouded and you will not see the good moves that come and go.
We once saw a person hedge their account and thought everything was ok. After 5 years the swap took all of the remaining capital and the trade was closed. They wondered what had happened to them. The loss was really taken when the hedge was placed and it took the normal workings of the market to finely end the frustration of a bad trade. We are speaking from experience having put on some hedge trades and thinking we could get out of them. After a while we just closed the hedge and started to trade the account normally with a clear view of what the market was doing. The account grew and we became better traders trading with a relaxed attitude toward the market.
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