Recovering From a Catastrophic Loss in Option Trading

Recovering From a Catastrophic Loss in Option Trading

We do not have to suffer a great amount of loss or wiping our capital if we become disciplined during the execution of our Forex trades. Your losses will always be small when the general rule of taking no more than 2-3% risk of your whole capital will be maintained regularly based on a small loss order point. Some of the investors may try to stick to their plan, but reality can be different, and studies show that even the most disciplined investors lose their commitment and closely involve with different trades that were not in their plan.

For instance, they can be overly confident to buy a particular financial instrument, which may move against them later, and their planning may fail. Some of them use a different strategy, such as taking the short moves when the price continuously goes upward, and they try to add new short positions and keep going higher and higher. If they are not lucky enough, then this type of gradual investment without any result may wipe out their account by making the balance zero in a sudden bearish market. Today, we will discuss how you can recover losses by avoiding these bad practices.

Why is it tough to recover the losses?

In reality, it may seem so tough to recoup losses as, during a catastrophic trade, an investor may end up losing all of his money. For example, if a trader in United Kingdom loses 60% of his investment by investing $10,000, then it is surely a disastrous trade because in his account we will get only $4000 left now, and to get the total capital back again, he must try to generate 150% more of profit. This may seem so harsh based on the different situation as the beginners are making heavy losses in the market because of their temptation. Trying to get money back may not end well all the time, and unfortunately, a newbie can lose what is already in their account.

To protect your account balance, you shouldfollow a strict risk money management policy from the start. You also need a professional broker will offer classic tools. Find more info about the premium trading platform and learn the use of such tools to improve accuracy.

Methods of recovery

Retaining our discipline is very crucial when we will face a heavy loss, and without having a profitable strategy with the best effort and improving the money management system sticking to the business may seem nearly impossible. Keeping post-it notes can be so helpful to remember the stop loss, and it is an ugly feeling when we lose a big amount of money in our business without having any proper planning. Beginners should give up chasing lost money as it will make them vulnerable to losing more.

One good thing about the platform is that it helps you to recover money by providing leverage, which can be got by the brokers. Estimating risk to reward ratio and setting up a stop-loss order without changing the point repeatedly, one can make enough profit in the upcoming trades to get his money back. For this, beginners must stick to their plan without making any whimsical decisions based on market volatility. But, if we become the victim of 100% of the damage, then it may take years to recover this.

So, the bottom line is, it can be inferred that if newbies continuously face loss in trading, then they should try to change their tactics and should not wait to wipe out their accounts with the whole capital. This is the right time to look at the system and check if your applied strategies are working correctly or not. We should try to find out why we are not getting the return on our investment and what methodologies need to be applied to improve.

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