Market Analysis

Why Should You Consider Your Losses?

There are possible defeats. It’s a reality as true as the sun rises in the east and sets in the west. Everyone will get a bitter taste of defeat sooner or later. But there’s no need to worry. Sometimes even the strongest fall down. Take the world-famous investor Warren Buffet, for example. He once spoke in an interview about how his toughest trade was to buy Berkshire Hathaway. He remembers letting him get the best of his emotions when he got ripped off that he ended up spending money on a terrible business.

George Soros has also had his fair share of setbacks, another wealthy businessman and famous business magnate. Back in 1987, when the U.S. housing market crashed, his fund ended up suffering a $300 million loss and maintained low returns for the remainder of the year. Also in 1998, the Russian debt crisis cost him USD 2 billion. He suffered another $700 million loss in the tech bubble the year after when he wagered on a fall. Then he wanted to redeem himself and anticipated an increase, but when the market finally tanked, it cost him nearly $3 billion.

To be indifferent about it is the worst way a trader can respond to losses. While it is not becoming too high or too low after a loss that is key to maintaining emotional stability, the absence of any feeling at all can lead to the indifference that could keep the trader from learning from experience. Because it lacks introspection, taking this kind of approach will not help you develop as a trader. It’s absolutely inefficient. Shrugging off a loss means missing a great opportunity to grow as a trader rather than taking the opportunity to learn from it.

We have to take a similar attitude when it comes to forex trading. Simply saying, “It didn’t work” isn’t enough. With indifference, you shouldn’t kill off potential growth. However, you will carefully examine your losses and assess what you have done wrong. Tell yourself what you could have done better to learn and build using that knowledge.