Bouncing Back from Bad Trades

How to bounce back from a bad trade

Just like the financial markets, all traders have their ups and downs. All traders, no matter how experienced, will inevitably face setbacks and encounter losing trades. But it’s how you handle these setbacks that’s most important in the long run. In this article, we discuss four important steps to help you bounce back from a bad trade and continue looking for opportunities in the markets. This article was written in collaboration with IG, Singapore’s No. 1 CFD/FX broker¹.

Step 1 – Take a pause to reflect

The first step in bouncing back from a bad trade is to take a step back and give yourself some time to reflect. It’s natural to feel disappointed or frustrated after a loss, but it’s important not to let those emotions cloud your judgment. Take a break from trading, whether it’s a few hours or a couple of days, and allow yourself to regain your composure. This break will help you gain a fresh perspective and approach future trades with a clear mind. Most experienced traders will tell you to avoid revenge trading at all costs.

Step 2 – Record the loss

Once you’ve taken a pause, it’s crucial to record the details of your losing trade. Document the specifics, like the entry and exit points, the reasons behind your decision, and any other relevant information. These notes will serve as a valuable resource for future reference. By analysing your losing trades, you can identify patterns or mistakes that led to the loss. This self-analysis will enable you to make adjustments and avoid repeating the same errors in the future.

Step 3 – Learn from your mistakes

Learning from your mistakes is a fundamental part of growing as a trader. After documenting your loss, review it objectively and identify the key lessons to be learned. Were there any warning signs you missed? Did you violate your risk management rules? Did you let emotions drive your decision-making? By answering these questions honestly, you can pinpoint areas of improvement and develop strategies to avoid similar pitfalls in the future. Every loss can be turned into a valuable learning opportunity.

Step 4 – Look for your next opportunity

Once you’ve learned from your mistakes, it’s time to look ahead and search for your next opportunity. Consider your trading plan and whether it’s still working for you. You don’t want to abandon your trading plan the first time a trade doesn’t go your way, but you don’t want to continue making the same mistakes, either. Should your next trade have a bigger or smaller position size? Should you make your stop losses tighter or looser? How about your take profits? There’s a lot to think about, so take your time and only place your next trade when you feel confident you’ve thoroughly weighed up all the factors.

By implementing lessons you learned from your losing trades, you can work to increase your chances of success in future trades. Remember, experiencing a bad trade is an inevitable part of trading financial markets. By following these four steps, you can bounce back stronger and wiser. Embrace any learnings, stay disciplined, and keep striving for improvement. With the right mindset and approach, you can turn a bad trade into a stepping stone towards long-term success.

If you’re just starting out, know that it’s completely normal to feel overwhelmed by how much there is to learn. But don’t worry, IG has created a wealth of high-quality resources to help you develop your knowledge and make trading more accessible. From the ‘Analyse and learn’ pages to IG Academy and the new Master Your Trading Mind hub, there’s plenty of content to dive into, so why not begin now?

What’s more, you can also practise trading by opening a demo account with IG. Trade thousands of markets with virtual currency here.

¹ By total number of client relationships. Investment Trends 2022 Singapore Leverage Trading Report

Losses can exceed deposits. Refer to Risk Disclosure Statement and Risk Fact Sheet at IG.com/sg.  Issued by IG Asia Pte Ltd (Co. Reg. No. 200510021K). This advertisement has not been reviewed by the MAS.