Whether it’s the result of unexpected market events or just a poor forex trade idea, losing money really sucks. What’s worse is that when it happens over and over again, it eventually affects your confidence and trading approach.
Just to make up for your losses, some of you probably resort to revenge trading by throwing your forex trading plan out the window and jumping in at every possible trade opportunity. Or maybe you become so scared of incurring more losses that you even begin to avoid trading some of your best trading setups.
Instead of reacting negatively to losses, a better mindset would probably be one that involves actively learning and improving from those losses. Successful forex traders study the mistakes they make and the market conditions/behavior in which the losses occur. They try to dissect the factors behind those price movements and adapt their trade strategy accordingly. By getting accustomed to this process of reviewing both winning and losing trades–and actively adjusting to improve one’s system–losses can be soon minimized and market patterns can be learned.
This process is called deliberate practice and it’s what the pros do in any performance field to get better! Professionals of every kind (including athletes, doctors, musicians, etc.) participate in this process to get where they are today.
Deliberate practice can be broken up into three primary stages: the act itself, feedback, and incorporation. Let me discuss each one.
1. The Act
As the name suggest, the act is your attempted performance. It doesn’t matter whether it was successful or not; what is important is that you tried to the best of your abilities. In forex, the act pertains to actually taking demo or live trades.
You must always remember that you cannot actively watch yourself when you trade. Instead of mindlessly going through the motions, you need to make a conscious effort to take a third-person point of view, record everything you can of your performance, and analyze what you did right and what you did wrong.
After you have properly recorded what you have done, you now need to take the steps needed to change the things that need changing. Ask questions like, “which pairs do I trade well?”, “which pairs do I do poorly?”, “what market times are more suitable for my systems?”, etc. By actively doing this everyday, you are able to jumpstart competence and develop your skills much, much faster.
By engaging in deliberate practice every day, not only does it become easier but the effect of the recording, reviewing and making adjustments turns one forex trading experience into many–thus speeding up the learning process.