The Psychology of Loss
Imagine if Rs. 500 fell from your pocket; a normal person would become restless. All day long, he remembers that my pocket wasn’t torn. Maybe I went to that shop; I didn’t leave it there. But when in the trading account, there are losses of Rs. 5000 to Rs. 10,000, and a person is looking at it, thinking that his money is getting lost, yet he lets it keep getting lost. Due to the hope that the market may reverse and my money may be recovered.
But what happens at the end of the day? The account becomes zero. Then, after the market closes, the same regret happens: if I had stopped at Rs. 5000, I would have done this work, I would have done that work. So, all these things start coming to mind, and the value of that money, after the market closes, and thinking about the same loss, he also feels guilty about himself, and he starts doubting his skills.
In trading, a loss not only takes away money but also takes away a person’s thoughts. What was logical yesterday has become emotional today. The losses of trading are silent; there is no scream, no sound. But they eat so much from inside a person that he cannot tell anyone what to do with it.
Two Paths After Loss
The story of every successful trader starts with a loss. The only difference is that some people get rid of that loss, while others learn from it. Here comes the turn where two people go in different directions from the same path.
The Gambler
The first trader, who only wants money back, wants recovery; he does not want anything else. For this trader, trading has become a form of revenge. He considers the market as an enemy. When you start trading only to recover, every decision you make becomes an emotional trap.
The Learner
We come to the second type of trader. Who has lost in the market and wants a recovery. But through his learning, he decides to go full-time trading. He has understood it as a craft. He considers the market not as an enemy but as a mentor.
Type 1: The 1 to 5 Lakhs Loss
Their pockets are empty. But hope is still alive. Your loss is not big. Loss of 1 to 5 lakhs can be recovered easily. But if the mindset doesn’t change, that small loss will put you in category 2.
- Step 1: Accept your reality. Acknowledge what happened and accept that you traded without a proper system in place.
- Step 2: Make yourself financially stable. With trading, money is made when you have money. If you don’t have money, then earn it before that. Get a part-time job. Start some small work at home.
- Step 3: Learn trading with zero risk. Open a free account on TradingView and observe market trends. Dedicate an hour daily to watching educational YouTube videos. Maintain a diary to record daily market learnings.
- Step 4: Start training with a demo app. In demo trading, you develop skills. So that you understand the trader’s actual behaviour.
- Step 5: Return to the real market only after 30 days of consistent success in demo trading. Start with a real account of Rs 10,000 to Rs 20,000 and place only one trade.
Type 2: The 5 to 10 Lakhs Loss
One of their biggest shortcomings is that they do Hero Zero a lot. Instead of fear, he started fighting with his ego. He borrowed money. Or lied to someone. He is broken inside.
- Step 1: Eliminate the hero-zero mentality. Stop aiming to be profitable in every trade and avoid all-or-nothing actions.
- Step 2: Stop trading with loan money. Trading is not a job to show your worth. When you are trading with someone else’s money, the market will remind you of your worth.
- Step 3: Learn to control loss. This is your lifesaver. Stop trading after 2 losses in a day. If you are losing 5,000 a day, remember: you are not recovering; you are putting it deeper.
- Step 4: Take a month break from the market. Use this time to review your losses honestly and reset emotionally before trading again.
- Step 5: Return to the market with Rs 10,000 to Rs 15,000. Make only one trade per day and do not change your trading strategy.
Type 3: The 10 Lakhs+ Loss
Who are these people? These are the people from the upper middle class. There was a lot of ego. There was overconfidence. When 5 lakhs fell, then he thought that he would take it out of the market. But now, with more than 10 lakhs gone, guilt is setting in.
Phase 1
Reset emotionally. Not to leave trading, but to learn again. Take a full month break from trading.
Phase 2
Restructure the capital. Don’t scatter the remaining capital.
- Step 1: Start swing trading. This is a safer approach. Focus on recovering losses with monthly targets of 5-10% returns through compounding, rather than trying to make big gains quickly.
- Step 2: Learn option trading (Hedging). Next 2 months: only learning Greeks, OI, IV, and data-neutral strategy. Only hedging strategy. Don’t do naked option buying. Intraday is not for you until you recover the entire loss.
The Conclusion: Recovery is a Marathon
Recovery is not a lottery done in a day. It’s a daily process. The golden rule: take out profit. If you earn 100 someday, withdraw it.
Recovery is not a race. It is a marathon. Understand this much. There will be mistakes at every step. But if you stay disciplined, there will be less of it.
In trading, the one who runs fast doesn’t earn money. In trading, the one who runs carefully.
