How To Overcome Trading Losses, Pivot To Wins


Simpler Trading Team

Apr 11th 2022  .  4 min read

Taking a loss on a trade is a rite of passage for traders. 

It’s not if, but when, a trader goes right when the trade goes left. Learning how to strategize setups to define risk and overcome trading losses is a crucial aspect of trading stocks, options, and any tradeable asset.

(Check out the free video, above, for insight into trading this changing market.)

How to overcome trading losses

Simpler traders understand that it isn’t all just a numbers game. Being a successful trader is just as much psychology as strategy. Learning how to overcome trading losses and knowing when to exit a trade and just move on takes traders to a different level.

Sometimes things happen out of a trader’s control – earnings reports or bad news – that cause a loss. Other times, a costly mistake was made and that is when going back to the drawing board to improve skills is a must.

Traders who let their emotions talk them out of following their own rules have only their own actions to consider. Of course, blaming isn’t any good for anyone and it’s important to remember that every trade is a learning experience.

Also, when a stock moves in a different direction than anticipated based on an event associated with the stock, such as earnings, this is certainly out of the trader’s control. 

(Check out the video, above, for insight into overcoming trading losses.)

How long to hold onto a trade?

The temptation to hold on a minute too long can have disastrous results that leave traders looking for any way out or holding on for a much longer time frame than they initially planned.

Investors who plan to hold an asset for longer time periods may want to consider whether they also would want that asset in their portfolio during earnings season. This can result in a give-and-take relationship with the market, where traders may miss out on moves upward, but they also miss out on the sharp declines.

When a trader does take a loss on a trade, they strongly should consider an immediate exit. Holding on even longer could mean watching a stock continue tumbling lower and lower. 

A trader’s time may be better spent looking at a different stock with better technicals entirely, as “wishing” a stock to bounce back has little effect.

Manage risk with position sizing

Managing risk means only risking a small percentage of the total account – position sizing. When a trader risks and loses 5% of the account, they still have capital to work with after the loss.

Traders should only trade with money they can afford to lose.

Be cautious of a trade that is a slow bleed. Holding a long trade long when the market shifts can cause traders to change their minds about their stop loss, and then it may be too late to save the trade. 

And, remember, “self-talk” can be brutal as traders reminisce about a stock that was such a good stock “back in the day.” They don’t want to give this up as a loss even when the stock trends down for months. 

A stock like this may not ever come back. When stocks give up they can stay down for a long time. If a trader gets a loss on a stock they had high hopes for, they should consider taking the loss and getting out.

Pay attention to trade stop loss

When a stop loss happens it makes sense to get out and move on.

This is when traders take a step back to assess the damage, find the details that would have alerted them to do something differently, and take notes of what they could do differently in the next trade.

Simpler’s traders focus on making more wins than losses and making sure their wins are bigger than their losses. It may sound too simple, but this is the foundation strategy that helps them build confidence in their abilities as traders.