How to Deal With Trading Losses And Learn From Them

Cobra Trading, Inc.
May 16, 2022

Losing is the most annoying part of day trading. Nobody likes being wrong, and it is extra unpleasant when there’s a dollar sign attached to each mistake. 

Every trader needs the right mindset. Day trading is your business, and any loss that you experience is an expense. Losses are inevitable, and this is something you need to accept before embarking on trades. 

But you shouldn’t get emotional about them. Instead, you should view them as an integral part of your process. Getting emotionally charged after a loss leads to overtrading and other mistakes. In that state, it’s much easier to trade based on impulses, and that’s how people blow up their accounts.

Good losses and bad losses

Good losses are the losses that happen as a part of your plan. When they occur, you have the entire scope of your trade laid out on a piece of paper or in an Excel sheet. You know your entry, exit, and the reason why you chose to trade that setup. You had the plan written out, and you followed it.

A bad loss happens when you hold on to a loss even though it has already breached your plan. Bad losses are also the ones that have no coherent plan or strategy to back them up. Simply put, bad trades lead to bad losses.

Good losses are bound to happen. Besides, you can learn from them because you have the data and know the thought process that led to them.

You had a loss. What’s next?

First, determine if it was a good or a bad loss. Good losses help you refine your strategy. Bad losses are just money thrown out the window. But even the bad ones give you some food for thought. You can ask yourself what emotional impulse pushed you into it and learn more about yourself as a trader. After all, this is how you find out your personal weaknesses and triggers. If bad losses keep happening, consider the  automation tools that Cobra Trading offers in order to protect your account in the future. And if you need any help setting it up or have any questions, feel free to reach out to our expert customer service team.

If it was a good loss, ask yourself what you could’ve done differently to improve the trade. For example, if the setup was reasonable, was there anything else that you possibly didn’t account for? Was there a trigger or a red flag that you might have missed?

That is especially important if you are at the beginning stage of your trading journey. Your losing trade may have looked like an A-type setup to you, but you’ll consider it a B-type in some years simply because you’ll know more. To gain that experience, evaluate every good loss you encounter. And once you have enough data to back up your decision, tweak your trading plan to reflect what you’ve learned.

But what if you take a loss and the stock goes in your direction? Was it a bad or a good loss?

A good loss happens when you stick to a trading strategy. This judgment is beyond numbers. Rather, it’s about building the discipline and the skill to follow through with your plan. Overthinking what happens after the trade is over can make you miserable and halt your progress.


Another important thing every trader needs to learn is how to recover from losses. You need to be able to move on from them to get back to trading. So if you have an uneasy feeling in your stomach or feel like you need to make the lost money back as soon as possible, step away from the computer and take a walk. You need to center yourself and relax; your energy matters when you trade. 

A market is a funny teacher. It doesn’t discipline you right away. Your revenge trades may succeed once or twice, making you feel like you can cheat with no consequences. Experienced day trader Tim Grittani has spoken about it; he also fell into that trap a while back. But when a lack of proper risk management backfires, things can get bad really fast.

This is why it’s so important to focus on the process. Ease back in, lower your trading size if you feel uncertain, and gain some momentum. Successful trading has a lot to do with confidence, and trading with a small size can help you get back to your process without risking too much or feeling beaten down when good losses happen.

You can open an account with Cobra Trading today! We are focused on people, passion, and platforms. Learn more about what Cobra can do for you.

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