LegacyFX is a retail broker with a strong focus on forex, currencies, stocks, commodities, CFDs, and indices trading. You can learn more about trading by watching the attached video.
With multiple global licenses, LegacyFX’s innovative platform incorporates a comprehensive educational centre, with video tutorials, e-books, glossaries, etc. to educate traders of all experience levels. This article explores potential bounce-back strategies for traders who have suffered a significant loss, outlining simple steps that can limit the damage.
How Can Losses Occur?
Virtually every trader will sustain losses at some point in their career. Losses can occur for a variety of different reasons, for example from lapses in discipline, technology meltdowns, or a sustained bleed-out of trading capital. Learn more about the changing landscape of trading by viewing the attached PDF.
Both fear and overconfidence are dangerous things when it comes to trading. Successful traders are confident, trusting their own judgement to see the market for what it really is; stepping in when there is an opportunity, and recognising when the time has come to cut their losses.
A big loss can dent that confidence, causing a trader to question themselves and their abilities. This can trigger the same types of problems new traders experience, such as the temptation to get out of trades too quickly, hold on to them for too long, get into more trades than they should, or skip trades for fear of losing.
Getting Back on Track
Fortunately, it is possible for traders to get back on track. Psychology is a crucial part of this process.
From breathing to smiling, human beings undertake thousands of activities every day without consciously thinking about them. The same skills that enable people to navigate the outside world on autopilot can have a harmful impact in the world of trading, however. It is therefore important for traders to learn to recognise and reprogram harmful habits.
Here are some unhealthy trading habits to avoid:
- Availability bias — where traders base decisions on the most immediate information rather than relying on and conducting research to catch any inaccuracies
- Loss aversion — where, in a trader’s mind’s eye, a loss has more significance than an equivalent gain
- Lottery syndrome — similar to availability bias, lottery syndrome causes traders to abandon well-defined strategies, taking big risks when enticed by the lure of big payoffs
A trader’s conscious efforts can easily be undermined by subconscious emotional forces unless they learn to recognise and avoid unhealthy trading habits. Discover more strategies to boost trading confidence by viewing the attached infographic.
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To learn about one of the most trusted and transparent brokers in the industry, visit the official LegacyFX website.
