Trading Psychology: 5 Reasons Traders Struggle with Losses

By NinjaTrader Team

Being a trader is about much more than just placing trades. For many traders, it represents a path towards financial freedom, the ability to be master of their own destiny, and the desire to break free from the limitations of a traditional work week. Although trading the futures markets can be an exciting and potentially life-changing pursuit, it’s no secret that many new traders struggle and often fail to achieve consistent success. 

Understanding your own personal trading psychology and gaining more control over your emotions is a crucial part of becoming a long-term consistent trader. 

In a recent livestream event, trading psychology coach Créde Sheehy-Kelly discussed how high-performance sports psychology can apply to futures trading. She explained how emotional management, patience, and a disciplined approach can help you become more confident, overcome the psychological impact of trading losses, and build more consistency into your trading.

Topics discussed in this free livestream:   

  • How negative emotions can quickly derail a new trader 
  • Why trading education is important for building confidence 
  • Why developing patience can be key to long-term success 
  • How to deal with the emotions of losing trades 

5 Ways to Start Trading Consistently and Mentally Manage Losses

To be a successful trader, you must be a consistent trader. Here are five ways to improve your consistency, work through losses, and level up your trading game. 

  1. Be educated and prepared: One of the primary reasons new traders fail is a lack of proper education and preparation. Futures trading requires a solid understanding of market dynamics, technical analysis, risk management, and contract specificationsA lack of this proper foundation can lead to mistakes and poor trading decisions with a loss of capital. NinjaTrader offers a wide array of educational resources, including livestream trading and commentary, a trading blog, and a library of on-demand videos and courses. 

  2. Avoid emotional decision-makingEmotions can be a trader's worst enemy. New traders often fall victim to fear, greed, and impatience, leading to irrational decision-making. Emotion-driven trades can result in impulsive buying or selling, chasing prices, or holding onto losing positions too long. Finding a way to reduce and mitigate the impact of emotions on your trading decisions is essential for new traders.

  3. Make a solid risk management plan: Effective risk management is crucial for long-term trading success. New traders often fail to implement proper risk management techniques, which can lead to significant losses and even wipe out entire trading accounts. The structure of futures trading provides some guardrails and features for new traders, including contract margin requirements and smaller micro-sized contracts, so you can hone your skills before placing larger trades or taking on more risk. NinjaTrader offers a full-featured trading simulation environment, where you can analyze the markets, practice order placement, and develop your strategies and trading plan.

  4. Have patience and discipline: Patience and discipline are essential traits for successful trading. New traders often fall into the trap of overtrading, chasing quick profits, and deviating from their trading plans. A trading plan encourages discipline by imposing trading limits, establishing entry and exit rules, and applying sound risk management to every trade. Having a trading plan will also help you master FOMO as it reinforces that there will always be another trade.

  5. Don’t trade the wrong market: New traders sometimes make the mistake of choosing the wrong market to trade. Many markets, such as stocks, ETFs, and options, can limit a trader’s access and flexibility. Futures trading offers a wide range of uncorrelated marketslower cost to entry, and the ability to easily go long and short with virtually 24-hour trading. Perhaps most importantly, futures provide true price and order transparency, providing a fair and level playing field for all traders.   

While new traders face numerous challenges, by working to overcome common emotional traps and improving your consistency, you can help to dramatically improve your chances for long-term trading success.

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