We all know that feeling when the trend turns against you and you have to watch your position slowly deteriorate. Definitely, this is not something you would want to experience. Yet, everyone engaged in trading will have to face this problem sooner or later. It is totally fine to lose a portion of your deals, as even the most experienced and successful traders do not win 100% of their trades. However, it is important to address the issue correctly in order to manage your risks and losses. Here are three different ways to address this problem.
1. Relax
It may seem obvious, but this is the first thing you want to do when the trend goes against you. No matter how many times you hear ‘get rid of emotions’, you won’t benefit from this technique until you do exactly that. You increase your chances of success by sticking to the trading strategy and staying cool-headed.
When you see a sudden trend reversal, avoid making emotionally driven decision. What you want to do instead is stay focused and continue trading in accordance with your trading system.
Fun fact: some traders get into meditation to get rid of anxiety and ease their mind.
We are not saying it is something you should do, neither is it guaranteed to help. Still, it is good to have a way to quit vicious psychological patterns and get your emotions under control.
2. Use stop losses
You might have heard that moving the stop-loss threshold once the deal has been open is a bad trading habit. And it usually is, as it is associated with emotional trading. However, you can introduce a rule to your trading strategy that says that “If the asset price breaks above/below a major area of resistance/support, I will adjust the stop loss”. This way you can manage your risk with the help of extended stop loss / take profit functionality, that is available to your trading platform, and at the same time avoid the pitfalls of random trade management.
3. Close the deal
There is always an option to close the deal.
Unfortunately, there is nothing you can do to control the market (unless you are George Soros) and certain deals will be lost. Until you start losing more than you win, you are good. This option is especially valuable when you feel emotional and don’t know how to overcome anxiety.
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