Losing money is never great. It can hurt you deeply, influence your everyday life. You can get introverted or even depressed. When I blew up my accounts, I did not want to talk with anybody about it because I was ashamed that I was not able to succeed. I bragged in front of my friends that I know what I am doing and that this will be my new career. Everyone just laughed at me, so why should I tell anyone that I failed?
I had a hard time to overcome my failure. At one point, I wanted to throw the whole idea of being a trader overboard. But I knew I couldn’t give up and that a part of being successful is to learn from failures. Here is what I did to overcome this dark time in my trading journey that hopefully helps you too.
1. Make sure you can accept the loss mentally
No matter if you want to continue trading or not, you should try to accept your failure. Taking failure is your first step to maintain a sharp mind.
I know the feeling where you are continually thinking about your loss. Every time you need to pay for something, it comes to your mind how much money you lost.
The best thing you can do, if you can’t get rid of those thoughts is, to talk with someone you are closely related. It will help you a lot to preserve mental stability as long as the person you are talking to is supportive and does not come up with allegations. Allegations certainly don’t help with your confidence.
Give yourself time and do things you like to distract yourself from the loss. Time heals everything!
2. Check your financial situation
So how much money did you lose? Did you lose the money you need to pay your bills? If so, you should not even think about going back into the stock market for now. Stabilize your financial situation and move some money you don’t need a side that you would not mind investing in the stock market.
You don’t need much to get back into streaming, so don’t think you need to save tons of money from getting back in (for example you only need $399 with Tradenet to get a decent amount of buying power). It is no good idea anyway if you go in big again when you lost a lot of money. Keep your risk as small as possible when you go back in.
3. Analyze your failure
You can only learn from failures if you analyze why they happened so that you can avoid it next time. So ask yourself this: How did this all happen?
I summarized some reasons that I identified with my failures:
- I was a dumb investor – I invested a lot of money into companies I believed in, and I blindly loved. The problem was that I put my money without having any fundamental knowledge of the stock market. I don’t have a degree in financials, and I am certainly no Warren Buffett nor do I have the time or the energy to analyze these companies for weeks. I base my investment strategy on hopes, and I can tell you, that is the stupidest thing I’ve ever done! I knew that I need to change my mindset, away from being an investor toward being a trader. So I started learning about technical trading, which was much more logical and more comfortable to grasp.
- I had no clear strategy – My trading was pure chaos as I had no plan what to do and how to do it. My education was utterly lacking, and I tried to improvise my way, which created a lot of bad habits.
- My emotions took control – Even though I had strategies, I could not execute them properly, as my emotions made me abandon my plan altogether. My losses were more significant than my winners, and the commissions from overtrading made things even worse.
4. Revise your goals
If you gained back mental stability and you are like me someone who does not want to give up, you need to set up some new goals.
I set up a few specific goals that I wanted to reach within the first months of getting back into trading:
- Trying to survive – Within the first three months, I wanted to get more education in technical trading and open up a small trading account. My main goal should be to trade small amounts of money with the setups I learn and not to lose any money in the process.
- $20 every day, doubling the goal each month – After my survival months, I wanted to increase my share size to make at least $20 a day in the first month and double that the next month. I would continue this until I reached at least $200 a day consistently.
5. Change your approach
As I pointed out earlier, you need to take action based on why you failed in the stock market. You need to find a different approach to make your journey a success.
A good start would be to look at what others are doing to get successful. I said already that being an investor as someone who has no degree in financials is not really an excellent way to go at it again. You need to use your money smarter, and the way you can do this is by learning to trade on a technical basis.
Technical trading gave me the structure I needed to make my money back. It is way less complex to learn than to try to analyze a companies fundamentals.
If you have no idea where to start learning, you can have a look at our free trading guide that shows you everything you need to know to get started.
Trading is not secure, but if you want to get success, you have to learn from your mistakes. Even minor adjustments could bring you to profitability. But if you have a go at it again make sure you go in with less money and never use money that you can’t afford to lose!