Conquering the fear of losing gains in forex unlocks calmer, more strategic trading. It causes traders to make impulsive decisions, leading to losing trades, overtrading, or revenge trading.

By accepting losses as part of the game, traders can navigate emotions and make sound market decisions.

Let’s discuss how traders can overcome the fear of losing gains.

What are the most obvious ways to lose trading gains?

  • Overleveraging: It involves using borrowed funds to amplify potential gains, but it also amplifies potential losses. A slight market movement against the position can wipe out gains and even the initial investment
  • Flash crashes: These are sudden, sharp price drops that can occur due to technical glitches, panic selling, or unexpected news. Flash crashes can quickly erase gains, especially if a trader's caught holding a long position
  • Revenge trading: This is driven by emotions: the urge to recoup losses after a bad trade. Revenge trading often leads to impulsive decisions, ignoring the trading strategy, and potentially making even more significant losses
  • Slippage: Slippage usually decreases gains due to small margins and can lead to missed opportunities.
  • Deviation from strategy: A well-defined trading strategy provides a framework for making informed decisions. Deviating from the strategy due to emotions, FOMO (fear of missing out), or chasing quick gains can lead to risky trades and ultimately, losses

Top tips to follow to overcome the fear of losing gains

Avoid overtrading

It involves making excessive trades, often disregarding the strategy and focusing on short-term gains. Overtrading can lead to:

  • Increased costs: Frequent trading means more fees associated with entering and exiting positions, eating into the potential gains
  • Missed opportunities: Constantly chasing trades can prevent traders from identifying and capitalizing on more opportunities that require patience and analysis
  • Emotional decisions: Overtrading often stems from emotions, leading to impulsive decisions that deviate from strategy and increase risk

To avoid overtrading, traders can develop a trading plan that defines their entry and exit criteria and stick to it. They should focus on quality over quantity, making well-analyzed trades rather than numerous impulsive ones.

Separate emotions from trading

A trader's judgment can be clouded and lead to emotional decisions like:

  • Holding onto losing trades: Fear of accepting a loss can lead to holding onto a losing position in the hope it will rebound. However, this can amplify the loss if the price continues to decline
  • Revenge trading: After a losing trade, the urge to recoup those losses quickly can lead to risky, impulsive trades, potentially leading to larger losses

Traders should maintain an objective approach. They should use stop-loss orders to manage risk and automatically exit losing positions according to predetermined price levels. They should also develop a post-trade analysis routine to learn from both wins and losses without getting caught up in emotions.

Focus on the process, not outcome

Focusing solely on the outcome (gains or losses) can be stressful. Instead, traders should shift their focus to:

  • Following the strategy: Traders should stick to their trading plan and entry/exit criteria. Also, ensure using proper technical analysis before entering a trade
  • Risk management: Traders should follow a risk management strategy and manage their position size
  • Learning and adapting: Traders need to analyze their trades (both wins and losses) to identify areas for improvement and refine the strategy as needed

Finally, traders can develop a performance tracking system to monitor their adherence to their strategy and risk management practices. Focus on the quality of their trading process, and the positive outcomes like gains will naturally follow over time.

Be mentally prepared for losses

Losses are an inevitable part of any trading strategy. Here are some ways to mentally manage it:

  • Maintain composure: Traders need to stay calm when a trade goes against them. This prevents emotional decisions based on fear
  • Develop a stop-loss strategy: A predefined stop-loss in place for each trade limits a trader's potential losses and protects capital. This allows traders to move on from losing positions and focus on future opportunities

Before entering any trade, traders must visualize both potential outcomes and determine an acceptable risk level. They must set stop-loss orders accordingly to manage risk and accept losses as a learning experience.

Utilize progressive exposure

As traders gain experience and confidence in their trading skills, they can gradually increase their position sizes. The measured approach minimizes the fear of losing large sums early on while allowing traders to test their strategy and build capital:

  • Start small: Beginning with smaller positions allows traders to get comfortable with the market dynamics and refine their trading skills without risking significant amounts of capital
  • Track progress: Monitor performance and gradually increase the position size as the trader's confidence and understanding of the market grows

Traders can also develop a growth plan for their trading capital. They should start with a base amount they are comfortable risking. Then, the trader can gradually increase it as they gain experience and confidence. This ensures traders do not expose themselves to excessive risk from the beginning.

Control emotions for strategic forex trading

Overcoming the fear of losing gains in forex is not about becoming fearless. It is about achieving a healthy balance between overcoming fear and not being reckless. By letting go of the need to control every outcome, traders can focus on what they can and should control - the trading strategy, risk management, and their emotional state.

Disclaimer: 

  • All material published on our website is intended for informational purposes only and should not be considered personal advice or recommendation. As margin FX/CFDs are highly leveraged products, your gains and losses are magnified, and you could lose substantially more than your initial deposit. Investing in margin FX/CFDs does not give you any entitlements or rights to the underlying assets (e.g. the right to receive dividend payments). CFDs carry a high risk of investment loss.