I’m trained as a counsellor and a doctor and the 5 stages of grief/loss/acceptance (many ways of calling it) can be applied to many life situations. In this post, I’ll apply it to trading, as an encouragement to those who are stuck or struggling, despite your best efforts.
Stage 1: Denial
So you decided to embark on the journey of trading forex, and pour yourself into books, webinars, pay thousands for gurus to tell you what’s in the books, pay subscriptions for guru advice, pay streaming services to get “first hand” news, get certified in technical analysis, and now you’re all ready.
Then you trade, and you lose. Over, and over again.
The first stage is Denial, where you refuse to accept that you can lose despite all the work and money you spent on learning to trade. It’s unacceptable! It’s impossible! Not even 1 win? Not even a single cent of profit? Impossible!!!
“It should not be like this!”
Stage 2: Anger
From denial, inevitably anger comes in. And anger has no place in trading. Ever. You revenge trade. You trade the opposite direction. You increase your trade size to “get it all back”. You make mistakes, more mistakes, and get more angry. You are now an emotional wreck, and continue to refuse to accept that with all the knowledge you have, and the resources you paid for, you still have not made profit. You’re angry at the guru for cheating you. You’re angry at the authors who say “it is possible”. You’re angry at the Smart Casual Trader who talks as if it is possible. ALL OF THEM ARE CHEATS!
Stage 3: Bargaining
For forex traders, bargaining may come in the form of just aiming to get a little profit…some profit…a small win….IF you do something special. Like, telling yourself “I promise I will donate the money to charity.” or “I’ll donate blood” or “I’ll go to CHC more often to get more oil”
This is the stage where traders are most vulnerable to cons. They will try anything and everything to succeed in forex trading. But, the good thing is, at this stage, they stop being angry, and start thinking of alternatives of how to succeed…although most of the time, the alternatives only give false hope.
Stage 4: Depression
Well it varies from person to person how badly depressed they become. They may never even reach this stage, and just be forever bargaining or angry or stuck in denial, all of which are unhealthy and unhelpful.
Depression is actually a quiet time. The sadness that comes allows time for reflection. They say things like “It’s hopeless, I can’t do it, it’s too difficult“. And depending on the resilience to failure, the person may either overcome this difficult period, or just finally give up completely. They will be forever sad when talking about forex, and be scarred for life, because of the deep sadness the experiences of denial, anger, and the futility of bargaining have brought upon them.
But, with resilience, they can overcome this stage, with support, and with a strong will, they have a chance to move to the final stage.
Stage 5: Acceptance
The truth is most retail traders fail. And acceptance of this fact, going through the first 4 stages, will bring peace, and the trader will end up wiser, stronger, and looking for the next big thing towards success. It may not be in forex. It maybe found in your passion in hamsters.
Accepting that forex is not for you, is difficult for those who have invested so much into it. But if it’s not meant to be, then accepting it will release you from all the pain and the chains to self-torture.
But there is another path. An acceptance towards success. And that is the acceptance that losing, failure, are all part of being a successful trader.
Most people, if not all, are brought up in a “fail is bad” society but those in the know, embrace failure as a stepping stone towards their dreams.
A very specific example, related to trading, is that losing is part of trading. Every sound trading strategy will have drawdown. Even the “Holy Grail” strategy of trend following has periods of drawdowns, because the market is never always trending.
It is possible to be overall profitable even if you lose 9 out of 10 times, if you have the mental and emotional resilience (and lots of patience and discipline) to allow your winning trade to hit your target that gives you back 11 times your investment.
This is the acceptance that you need to have, to complete the 5 stages and end up successful. It’s not the end of the story, however. But a beginning of the next chapter, of accepting losses as part of your system, and reflecting on how to still be profitable overall. The next step, is execution, reflection, and focusing on the process.