Top Secrets of Learning from Bad Trades
It’s impossible to always make good decisions. Regardless of the market you’re trading on and the strategy you’re using, bad trades will occur. We know this from our experience. Actually, the very idea of Superorder originated after a night full of bad trading decisions paired with poor software capabilities of regular exchanges.
Anyways, there’s a good thing in bad trading. Apart from game-changing ideas that lead to new projects, these moments can help you to become a better investor. Surely, you heard that traders should learn from their mistakes. The thing is that many market players aren’t ready to admit them so they don’t learn at all.
Hence, your first and most important step is to find out the problems. Let’s do this.
Bad Trading Types
Humans rely on habits a lot. We wake up, shower, eat, commute, work, watch TV, and sleep. Our daily lives are full of repetitive things that slowly turn into habits. Some people, who follow the same pattern for many years, can even repeat it unconsciously! The problem is that we bring habits to trading. And that’s dangerous.
Stop reading now and remember your worst deal. Here are three main types of bad trades that you can use as samples:
- Big losses — wrong purchases, untimely investments.
- Missed opportunities — too early take-profits, not entered deals.
- Revenge trading — series of consequent blind losing trades.
So, have you remembered a few mistakes? Now, think about the reasons. It can be difficult but you should overcome yourself. That was a bad trade but now it’s time to analyze it without emotions to move further. Most likely, after a proper analysis, you’ll figure out that there weren’t any specific thoughts. The majority of bad trades are the results of automatic decisions related to familiar patterns or setups. This is how habits ruin your trading.
Lessons to Forget Right Now
To assist with your research, we also have some prominent mistakes here. These are examples of bad habits that we stick to without realizing their harm. Now, check the list and understand each point. Answer honestly if you have these habits. And get rid of them:
- Break your own rules. It’s one of the most common failure reasons. Sometimes, you should trust your intuition. But never do this just because you’re afraid of losing. By following rules, you can accept losses quicker and move further.
- Invest more in a bad trade. This issue is similar. Sometimes, pro traders can add to a bad position because they have a comeback plan. But it’s a bad idea to invest based on emotions, desire to change something without a strategy.
- Move stop-loss levels. Often, when you see a losing trade, you want to prevent it. For this, traders move their SL barriers, hoping for the trend’s reversal. Stop doing it. Learn to accept small losses to avoid bigger ones.
- Move take-profit levels. This one may look good. Really, why not move the TP order higher when the price is growing? Fight this desire. It destroys your strategies and often leads to cut profits because prices can reverse at any moment.
- Re-enter the position immediately. Here we have an illustrative example of revenge trading. Again, feel free to re-enter if you see objective signs and have a plan. But never do this just to prove that you’re still in the game. Better, rest a bit.
- Take bigger risks. After a series of bad trades, you want to cover several losses with a big winner. Thus, you widen your limits and enter into positions with dangerous risk-reward ratios. Usually, this decision leads to even bigger losses.
Concluding this section, we can state that professional traders are ones focused on the process, not the result. They follow their strategies and rules. As well, they know when they can step aside to trust this gut feeling. We have a bunch of tips that can help to become a pro trader. But the cornerstone idea is simple: stick to rules, focus on the process.
The Best Approach to Bad Habits
Following the idea of unlearning, you should sit and revise your worst trades. As you already know, it’s difficult and painful but it’s also crucial for your success. Our brains don’t want us to suffer so they push unpleasant memories to the farthest corners, tell us not to think about these moments, use various tricks to stop us.
It may sound cruel but your brain is your enemy at this moment. Fight it, force yourself to return to bad memories, and look at them closely. Think why did you enter this position, which signs did you see, were these signs objective, or was you biased. This exercise requires several repeats but you’ll become honest with yourself, eventually.
At the end of the day, you should identify core emotions and other drivers that led to bad trading decisions. They form patterns and habits. Knowing these things and being able to spot them before the trade is real mastery. That’s your desired outcome. Learn and succeed, we believe in you!
