Whether it’s the result of unexpected market events or just a poor forex trade idea, losing money really sucks. What’s worse is that when it happens over and over again, it eventually affects your confidence and trading approach.
Just to make up for your losses, some of you probably resort to revenge trading by throwing your forex trading plan out the window and jumping in at every possible trade opportunity. Or maybe you become so scared of incurring more losses that you even begin to avoid trading some of your best trading setups.
Instead of reacting negatively to losses, a better mindset would probably be one that involves actively learning and improving from those losses. Successful forex traders study the mistakes they make and the market conditions/behavior in which the losses occur. They try to dissect the factors behind those price movements and adapt their trade strategy accordingly. By getting accustomed to this process of reviewing both winning and losing trades–and actively adjusting to improve one’s system–losses can be soon minimized and market patterns can be learned.
This process is called deliberate practice and it’s what the pros do in any performance field to get better! Professionals of every kind (including athletes, doctors, musicians, etc.) participate in this process to get where they are today.
Deliberate practice can be broken up into three primary stages: the act itself, feedback, and incorporation. Let me discuss each one.
1. The Act
As the name suggest, the act is your attempted performance. It doesn’t matter whether it was successful or not; what is important is that you tried to the best of your abilities. In forex, the act pertains to actually taking demo or live trades.
2. Feedback
You must always remember that you cannot actively watch yourself when you trade. Instead of mindlessly going through the motions, you need to make a conscious effort to take a third-person point of view, record everything you can of your performance, and analyze what you did right and what you did wrong.
3. Incorporation
After you have properly recorded what you have done, you now need to take the steps needed to change the things that need changing. Ask questions like, “which pairs do I trade well?”, “which pairs do I do poorly?”, “what market times are more suitable for my systems?”, etc. By actively doing this everyday, you are able to jumpstart competence and develop your skills much, much faster.
By engaging in deliberate practice every day, not only does it become easier but the effect of the recording, reviewing and making adjustments turns one forex trading experience into many–thus speeding up the learning process.
Deliberate practice becomes much easier when you, as a trader, expand your knowledge of forex trading. The world of trading is so big and dynamic that there is always something new to learn almost every day or every week.
To learn how to trade–or do any other professional activity–you have to learn the basics and not stop there! The more you learn, the more tools you can add to your trading tool box. And the more knowledge and tools you have, not only does deliberate practice and trading become easier, but the less risker your trading decisions can become.
It starts with accepting defeat. Once you accept that losing is part of trading then you can truly move on to deliberate practice and hard work so you can learn from these losses. Combining this with the thirst for knowledge and good discipline will set up your foundation for success.
It’s also important to keep asking questions. There’s nothing wrong with asking questions. It opens to the door way to more opportunities, new discoveries and more knowledge. An old and wise Chinese trader once said, “One who asks a question is a fool for five minutes; one who does not ask a question remains a fool forever.”
Asking questions from those who are more experienced might give that one bit of insight that could push you in the right direction or to the next level of your trading skills. You never know. It never hurts to ask. So, unless you want to remain a fool…ask questions!
Lastly, like any good student, you should always track your progress. You do this by keeping a detailed forex trading journal of the market’s behavior and your performance. Keeping a journal helps you see your strengths and weaknesses. It helps you determine what you are doing right or wrong. Most importantly, keeping a journal keeps you honest. Most of us do not have the luxury of a trading mentor or coach to keep us straight, so in the end, it is only you who stands to gain or lose.
All it takes is initiative to keep learning and improving, and the discipline to stay on course towards your goals even when the going gets tough.
Your success depends on YOU and YOU alone.
