Here’s a mental trick which I like to use to help manage my mindset when trading, and to help me take losses better.
If you’ve traded long enough, you would know that “revenge trading” is one of the most dangerous mindsets to lapse into when day trading.
Once you start losing (especially if you lose big), you feel angry and you want to hulk smash everything and take risky trades just to get back to breakeven.
Which would obviously lead to even further destruction.
So, what’s the mental trick?
Well, before I go further, I have to first state that the number one rule to prevent lapsing into revenge trading is to keep your risk per trade small.
Small position sizes make you far less attached to every trade, and make you less angry when you lose them.
OK so here’s the mental trick I use:
Before I take any trade, I will determine my remaining account balance assuming I lose the trade and ask myself: “Are you OK with having this remaining account balance assuming you lose this trade?”
If the answer is “Yes”, then I will proceed with the trade.
For example, assume I have an account size of $10,000 and my bet size is $100:
Before jumping into the trade, I will ask myself if I am OK if I am left with $9,900 in the event this trade is a loss.
This makes me mentally prepared in the eventuality that the trade turns out to be a losing one.
And I’ve found that this mental trick serves me quite well in handling losses.
Most of the time, we take trades only thinking that it will be a winning trade, and we refuse to entertain the thought of the trade being a losing one.
And when we see our remaining account balance after a loss, our emotions simply cannot handle it.