Getting Back Your Losses in Trading

I wanted to write a lesson today about what happened to me this weekend, and how it relates to trading.

A Dutch Friend
Last Friday, a very good friend of mine named Mark came into town for a few days.  Mark is Dutch and trades derivatives for a multi-national Oil and Chemical company.  Anytime he comes to see me, two things are certain to happen;
1) we are going to have a glass of good Scotch
and
2) we are going to play poker at the casino and will likely not get home till sunrise

poker and trading 2ndskiesforex.com

For the first two hours, my table play was going a little slow as I just wasn’t getting any hands. Unfortunately this led to me losing many of the blinds and small bets, now down to about$110.

Luckily, some really good hands like a flush, trips and full house came my way where I won some decent sized pots.  I was now just over $1000, so doing well on the day being over 3x my buy-in.

A Two Pair Hand
Then I got an A3 suited sitting in the big blinds.  Everyone folded except for two players who limped in.  Sensing weakness I decided to raise and the other two called.

Flop lands A / 3 / 8.  I’ve got two pair and there is no flush draw on the board.  I probably have the best hand since the limpers unlikely called my raise with 8 /3, and an A 8 would have likely raised with all folds prior.

One folds and the other calls with me being in position.

A Jack comes on the Turn with no flush possibility.  He checks, I raise $50 on a pot of $75 and he calls.  I probably still got the best hand.  Maybe he had J8 pre-flop, but AJ is unlikely to limp pre-flop. J3 is unlikely play to a raise, so I probably have the best hand.

The River card comes a 7 which he checks.  I bet $125 and he goes all in.  To call, I need to put in about $350 more which would leave me with around $500 left.  Now I have to go into a deep think to figure this out.

over thinking in trading 2ndskiesforex.com

Overall, his betting really confused me.  He limped in out of position, called a pre-flop raise out of position, had no flush draw, and called every bet along the way.  It is unlikely he had pocket Aces as he limped pre-flop.  Maybe a KJ, but he would have likely folded the Ace flop.

Because his betting pattern didn’t make sense, usually that means a bluff or a trap.

I decided to call.

Turns out, he had 9 T off suited, and on the river had hit his straight (7-J). He had <16% chance of hitting his straight on 71% pot odds, so way inverted R:R.

Regardless, he won and I went from over $1000 to about $500 in 5mins.

Needless to say, I was a little stunned – not because of the money, but because of how I misread the play.

In The Past
For the next 10 hands, I was mostly stuck thinking about the hand – wondering where I went wrong, what I could have done differently, going over his reactions to see what clues I missed.

And herein lies the problem…I was stuck in the past and completely separated from the present.  All my energy, concentration and focus was in the wrong place.

Next thing you know, I’ve lost a few more hands and am down to $250, and am now negative for the day.  It was now 4.30am so a good chance I was going home a loser which almost never happens for me in poker.

What Would I Do…
Immediately I started to think about trading and what would I do in a similar situation.  I came to one conclusion – that was to let it go and get present with the moment.

making money 2ndskiesforex.com
By 5.30am, I had a stack of over $600 after winning two big hands and got up for the night.

What made me write about this was something I saw in a trade journal today from one of my newer students.  They had lost a big trade and then lost the next few trades shortly after.  They did not follow the system, but had enough awareness to write down they were trading to ‘get back their losses‘.

Perhaps they really couldn’t lose that money and were expecting to win to pay some bills.  Or maybe they made a mistake and are now punishing themselves for such a trading crime.  Whatever the initial ‘reason‘ was, two things are completely evident;
1) they have not accepted the loss
and 
2) they are stuck relating to the past and not the present

The irony of it is, you cannot ‘get back‘ your losses.  Once you’ve lost that money, it is gone.

< Than Your Full Edge
The great thing about this market is you can make money anew at any time.  But you cannot ‘get back your losses‘.

In fact, this is when your account is most vulnerable, because you have psychological justifications for not trading according to plan or system.  You’re trading off emotion, but also fragmented from the moment and separated from your intelligence.

Has this happened to you before?

I’ll confess it has happened to me, many times in my earlier days.  Regardless of what happens, the best thing you can do is let it go so you can be present in the moment.  Maybe you need to take a break to get your head straight which is not a problem.

But remember who is making money in this market and who you are really competing against;
-professionals
-institutions
-seasoned traders
-computer algorithms

Anytime you are trading <than your full edge and intelligence, you are at a severe disadvantage to the above players.

By trying to get back the losses, you are doing one, if not all of the following;
a) stuck in the past (disconnected from the present)
b) not accepting reality as is (never works)
c) likely trading off more emotion than clarity (no bueno)
d) managing your P&L, not trading the market or your system (a big one for newer traders)

psychological compass 2ndskiesforex.com

In Conclusion
Part of developing into a successful trader is becoming more self-aware.  This is especially true when things go really bad as we are faced with a poignant, and often psychologically painful (or uncomfortable) reaction to reality.  But nothing could be more important because when our psychological compass is off, you are at the greatest risk for making further losses.

This was the same for me shortly after I lost my big hand and likely has happened (or will) to you in your trading.  But hopefully you can now realize how critical it is to not try and ‘get back your losses‘ as its a futile effort.

Best to start all over again with the present moment, and make the best trades you can.  If you do, in no time, will you be back to winning again, and likely have a higher balance than before the loss.  Then the loss was more of a learning experience instead of a hurdle to your growth.

I’d like to end with a short story about a Buddhist Lama and their student.

Being really unhappy with how they have led their life, a student who has just started to meditate came to his Lama and shared his disgust with how his life has been going.

He then stated to his Lama:

“I wish I could just start my life all over again”

The Lama, after a very short pause responded:

“Your wish has been granted” 

I hope this helps and that you found this article useful.

Kind Regards,
Chris Capre
Founder
2ndSkiesForex.com

Other Related Articles:
Poker, Concentration and Trading
5 Mantras for The Developing Forex Trader
7 Signs You Know You’re Maturing As A Trader

Buddhist, Trader and Philanthropist

I'm Chris Capre, Founder of 2ndSkiesForex. I help traders of all levels change the way they think, trade and perform. As a professional trader, I specialize in trading price action. As a teacher, my passion lies in showing you how to re-wire your brain for successful trading. Want to improve your edge right now? Visit my Price Action Course page.

Related Article

  • Daniel

    This will help a lot of people… if they listen. This single thing caused me to blow up my account many times until I figured out that I was doing it to myself. I still get that self-doubting “the sky is falling” feeling after a few consecutive losses. Now, when that happens I take some time off and plan for my next trades. It is empowering. In no time I have my confidence back and am ready to trade. I do not blow up accounts anymore, and am on my way to profitability. Thanks for the good words Chris.

    • Hello Daniel,

      Yes, many people have gone through this so hopefully it helps you and others avoid this mistake.

      But glad to hear you have figured out a method to deal with these situations. That is the first step in the process so well done on that.

      Kind Regards,
      Chris

  • Jere

    great article. Made this mistake before and learned alot for this, not just for trading but in life in general thanks

    • Hello Jere,

      Yep, you are not the only one 😮
      But glad it helped.

      Kind Regards,
      Chris

  • JC

    Chris,

    This was a good post…I can relate to the above as I am currently going through a bit of a losing streak and cannot seem to get things turned around and back in my favor. I do agree and think that taking a break from the charts was good in that it enabled me to sort things out mentally to make sure I was simply not trading to “get back my losses”. Now the challenge is to keep moving forward after I have already taken a break a few times and each time I return, I seem to keep losing right off the bat which in turn starts to make me question my methods in general as soon as I take a trade.

    • Hello John,

      Glad to hear you found it a good post.

      I think a good place to start would be to keep a trading journal and start logging your thoughts and emotions when you are trading and making trading decisions.
      I also think doing something each day to prepare yourself mentally and psychologically would help so that you are present and not thinking about the past when trading.

      Also perhaps turning off the box on your platform which shows your balance and P&L so you manage your trade, not the P&L.

      Hope this helps but if it continues, then perhaps there is an underlying psychological program or limiting belief which is interfering with your trading.

      Kind Regards,
      Chris

  • Mantas

    Hello Chris,

    Very interesting article.

    Btw I’m going to try your favorite “Scotch” today 😉

    Kind Regards
    Mantas

    • Hello Mantas,

      Glad you liked it.

      If you’re going to get a Macallan, I recommend knead style, or on ice. If you can get the 12yrs, that is a smooth player, but if you really want to put a few pounds behind it, then I’d recommend the 24yr which goes down nice and easy.

      I’m not sure where you are, but if we are ever in the same city, lets make sure to get a Macallan together – nothing like a good scotch amongst friends :-)

      Kind Regards,
      Chris

      • Mantas

        Thanks for your recommendations Chris. I’ll keep it in my mind.

        It seems I’ve got wrong information about your favorite one :) I tried Glenfiddich 12yrs. That’s a really nice one.

        Just let me know when you are coming to London and we will definitely get a Macallan together 😉 24yrs sounds very impressive…

        Kind Regards
        Mantas

      • Oh yeah, Macallan is one of the best ones out there.

        Next time in London, we’ll definitely put down a few nice and easy.
        Especially if we can find the 24yr one.

        Until then – all the best.

        Chris

  • TasosK

    Hi Chris,

    Excellent article, which truly resonates with the experiences of most (if not all) traders and certainly those of me.

    It’s not straight forward to recover from a loss; it requires a lot of strength, stamina and self-control. As a matter of fact, you need to fight and win your biggest enemy that is the “untamed” side of yourself…

    Needless to mention that it is rejuvenating to read such an article within a difficult trading period…

    Kind regards,
    Tasos

    • Hello Tasos,

      Am glad it has helped and resonated with you.

      And yes, the biggest enemy to you trading successfully is…YOU!

      But keep at it – rewards are only for those who persevere.

      Kind Regards,
      Chris

  • Xiao

    Hi Chris,

    Great article and seemingly like a lot of other people who have commented, this article was very timely.

    I believe I have started to accept my losses as I know and realised “revenge trading” is not very effective.

    Love your stuff.

    Cheers,

    Xiao

    • Hello Xiao,

      Yes, ‘revenge trading’ is not effective, and when you can start to accept that losses are a part of the game, that you should expect them, be comfortable with them, learn from them, and move on, then your emotions will be less involved in your trading decisions, and more clarity of trades and decision making will spring forth.

      But glad this helped.

      Kind Regards,
      Chris Capre

  • Craigus

    Yes nicely put. A new moment. Happens in life too, to fixate on past injustice. Responding by conscious awareness is far better than that sneaky automatic state that creates chaos until we suddenly recognise it. Thanks Craigus

  • Paul

    This is one of my biggest challenges – my journal is full of “revenge traded” quotes followed up by “why did I trade 10 times my risk size”. I am aware I am doing it after the fact but need to work on preventing myself from doing it in the first place.

    Cheers Chris