At some point in life, we all experience grief.
Particularly when a loved one passes away, or you suffer through a traumatic breakup or divorce, you will most likely go through all five stages of grief:
- Denial
- Anger
- Bargaining
- Depression
- Acceptance
Going through these stages is a healthy way to cope with a loss or painful experience.
However, these aren’t just present in personal or family life.
When you hit financial turmoil — such as losing big on a trade or blowing up a trading account — you might notice yourself going through these stages as well.
See, financial pain is one of the most brutal pains to cope with…
And if you trade or are in any way involved in the securities industry, you have most likely felt this pain.
That deep, gut-wrenching pain of seeing all of your profits disappear… your screen so filled with red, you forget what the color green even looks like.
Of course, taking a loss shouldn’t be a financially crippling event.
If you’re trading on the side, you shouldn’t be trading money you can’t afford to lose.
Make sure the bills are paid first.
And whether or not you’re a full-time trader or a side hustler, you should use smart risk and reward ratios when trading and ALWAYS USE A STOP LOSS.
This is not negotiable.
You can either lose a defined amount with a stop loss or hold that loss and watch your investment go to zero.
But with that said, we all make mistakes and run into trades gone wrong. It’s a fact of life.
So let’s go over the 5 stages of trading grief.
I’ll share with you how I deal with them so you can minimize the damage and push forward.
Denial
The first stage after taking a loss is denial.
You know — thinking and saying to yourself, “It’s just a small loss. It’s certain to come right back up.”
Let me be the first (and hopefully only) person to tell you this: it doesn’t have to come back up.
That stock doesn’t have to do anything you think it should.
It can go to the moon or straight to zero, and there isn’t a damn thing you can do to stop it.
If you use a stop loss, you’ll know if you’re right or wrong about the trade very quickly.
If you’re not using a stop loss… then RIP to your account.
Don’t be a bag holder and try to avoid a small loss, only to get slapped with a huge one.
Denial is hard to conquer and the hardest to adapt to.
Just remember that a loss can happen, it will happen, and most stocks don’t recover.
Take your small loss and move on.
Anger
After denial comes the anger and frustration.
You’re mad at yourself for taking the trade.
You’re mad at the company whose stock you put faith in.
You’re mad at your broker.
You are just plain mad at everything.
The best thing to do at this stage is to accept accountability for what happened.
99.99% of errors are caused by the user when it comes to trading.
I’ve only had a broker mess up one of my trades — and when I gave them all my info, they corrected the error.
Still, I lost money on the trade because of how trading inherently is.
Here’s the thing: there’s no reason to get upset over a trade.
The next one is around the corner — and it could be a great winner.
Take the loss as an opportunity to pump the brakes and cool off. Clear your head, and come back laser-focused.
Bargaining
No matter what God you pray to, there is nothing that will change the outcome of that trade.
A loss is a loss.
The best thing to do at this stage is to formulate a plan for the next time you take a loss.
That way, you’ll have a guide on how to react and how to feel about your trading.
Bargain with yourself.
Reward yourself for making intelligent decisions by sizing up your trades.
Make sure that the plan is reasonable and actionable, and be honest with yourself when you fail.
Depression
People make mistakes, especially in finance.
Just look at the hedge funds that shorted GME stock.
Those are “professionals” managing billions of dollars, and they lost a ton of money being dumb and shorting a sub $10 stock.
I’ll repeat it until I turn blue in the face: losses happen!
Don’t beat yourself up. Move on. Live to trade another day.
The most important thing to remember is to learn from what happened and let it burn a lesson in your mind.
Success is made from failure. Fail small and fast.
Acceptance
This is the stage everyone should start with when they take a loss.
The best traders in the world invest zero emotions in earning profits or taking losses. They recognize what it is and repeat what they know will work.
Trading is meant to be boring. The moment it gets exciting, you need to take a look at your risk.
Be boring and repeat what works!
Double down on what makes you money, and cut off what makes you lose money.
If you are losing every trade, stop trading and reevaluate your strategy.
If you are winning a bunch of trades, size up what’s working and keep bringing home that cash.
Just don’t lose your cool when the streak comes to an end… because it will at some point.
Speaking of, here at Big Energy Profits we don’t trade on emotions.
We manage the occasional loss that we see — but we see many more (and larger) wins than losses in the first place.
Click here to learn more if you’re interested.
Wishing you big profits!