How to Deal With Stock Trading Losses

Author: James Clark



Everything You Need to Know About Getting Over Stock Market Losses



Nobody likes to lose their hard-earned money. Unfortunately, a loss is the only thing guaranteed in the stock market. However, learning how to deal with stock trading losses can be the difference between success and failure in future trades. Coming back from a huge loss is undoubtedly difficult but not impossible. Besides, every successful stock investor knows the game isn’t about winning all trades but has a positive win-loss ratio.

In this post, we’ll talk about the three types of losses in the stock market and how to deal with them to boost learning and create better opportunities in the future.

3 Types of Losses in Stock Trading



Below are the types of losses that stock investors often incur:

1. Loss of Capital

Short-term or long-term capital loss simply occurs when you sell an asset at a price lower than its purchase price.

2. Loss of Profit

Investors who can’t anticipate the rise and fall of stock prices due to volatility often end up sitting tight, hoping for recovery, which isn’t guaranteed. As a consequence, they miss out on small profits.

3. Loss of Opportunity

Suppose you purchase a stock for $50, which only rises by a small margin annually. You might think that you haven’t lost money. In reality, you have traded off the opportunity to invest $50 in a more profitable stock.

How to Deal With Stock Trading Losses



The following are some steps you can take to deal with losses and become a more emotionally stable and disciplined stock investor:

1. Take a Break

The first thing you should do is stop trading and try to figure out what happened by reviewing every event carefully. For example, did you fail to get rid of losing trade to avoid a loss? Did you invest in a new industry? Or, did you take on too much risk and volatility?

2. Accept Your Losses

You can’t succeed in the stock market without losing trades. Own your losses and never hide from them. It’s the only way you can better control future trades. As aforementioned, stock trading is about creating a positive win-loss ratio, so even a huge loss can still keep your overall stock portfolio profitable.

3. Devise a Better Trading Strategy

Once you’ve recuperated and figured out what went wrong in your previous trade, it’s time to create a new trading strategy with better stop orders, new stocks, and holding/selling decisions. You can also diversify your portfolio with stocks from industries you’re more familiar with instead of following the herd.

Conclusion



Loss is inevitable in the stock market. However, successful investors learn how to deal with stock trading losses using the losses to improve their skills. Using your weakness as a catalyst for future trades can help you get back in the game and make smarter investments that maximize profits and minimize losses.

Stock Picks



1. Titan Machinery Inc (TITN)

2. UnitedHealth Group (UNH)

3. Total Se (TOT)

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