Trading is not an easy venture: in fact, many traders lose their money on many deals before making any progress, especially if they do not have the proper training and practice. But getting stuck in a losing streak may feel discouraging, even terrifying. How to manage the risks in trading and enhance your trading skills?
There are several steps that a trader can follow in order to manage the risks and losses. However, it can only be done after looking closely at the reasons why it happened in the first place.
1. Take a break
If you are losing, stop trading, at least temporarily. It sounds obvious and harsh, but it is true. Yes, losing is a natural part of trading, and there will always be unprofitable deals, because there is no secret trick to 100% profitability. But if you are constantly losing money, and you catch yourself revenge trading, put an end to it by taking a breather.
Going on a walk, making a cup of tea or even doing the dishes are all great distractions that you can occupy yourself with. Take this time to think about something different and return to trading later. Don’t push yourself to trade more if you can feel that it’s only making things worse.
2. Assess your emotions
Strong emotions, both positive and negative, are dangerous for trading. They make you act irrationally, and that can be the cause of a losing streak. Avoiding emotions is not very easy, but it has to be done. In order to emotionally detach yourself from what is happening in your traderoom, make sure to stick to your trading plan and act according to what your preferred strategy tells you. Committing to your plan and ensuring self-discipline are keys for improvement.
3. Use the Practice account first
Before going back to trading on the Real balance, try training on the Practice balance first. It is convenient, since it has all the same features, but does not require any real money. Make sure to test your trading strategy and improve it, if needed. Read our guide on the 5 signs of a bad trading strategy to know whether you are on the right track.
Using a dummy account will take some of the pressure off and allow you to calmly apply your trading tools. Exercise your trading plan on the Practice balance first, this way you will understand if it works for you and it will be easier to execute it on the Real balance next.
4. Mind the risk
Traders often enter a losing streak because they forget about risk management or dismiss it completely. Why is it a bad idea to bet all of your funds on a single deal? Because even if you manage to benefit once or twice, in the end, an unprofitable deal will wipe your balance out. This is why it is crucial that you remember about the 2% rule, use Take Profit and Stop Loss features and implement other money management techniques. Managing the risks and losses that will occur is more efficient than trying to regain the funds after that loss has happened.
5. Set yourself up for success
A losing streak might be the result of self-sabotage. Make sure that when you trade, you have the time and the energy to follow points 2-4 closely. Think your trading through beforehand, arranging your trading session in a positive and productive way, setting yourself up for success. Having a clear strategy, a plan in mind and all the analysis tools at your disposal is crucial in order to enhance your trading skills and possibly any results.
Breaking a losing streak might be challenging, but it is an experience that may teach a great lesson. Following the described steps might help a trader manage any risks and/or losses and start a new, possibly much more productive chapter in their trading career.
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
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