The Importance of Visualizing Forex Trading Losses



I know what you must be thinking – with a title like that, he must mean visualizing trading profits, not losses. After all we’re supposed to visualize what we want to happen in life, not what we don’t want to happen. But I assure you the title is correct. As you may well know, there are many things when it comes to trading Forex that do not fit neatly into the confines of what is considered “normal” behavior to achieve success; how you respond to losses is certainly one of them.. Unlike most endeavors in life where you can stay on the offensive and see great results, becoming a successful Forex trader requires the opposite. Finding consistent profits as a trader is all about staying on the defensive. This idea alone goes against human nature. We’re told throughout life that the more we visualize success the greater our chances of success become. And while visualizing yourself as a success can be beneficial, ignoring the visualization process for trading losses is always disastrous. As I’ve always said, your best offense is a good defense when trading Forex. One way to achieve a defensive mindset is to always visualize the potential loss before putting on a trade. Worst Case Scenario Visualizing a potential loss isn’t about seeing what you want to have happen. Obviously every trader wants to be profitable one hundred percent of the time but of course we all know that simply isn’t possible, and that’s where visualization can help. In any situation where there is risk involved, knowing the absolute worst case scenario is always beneficial. But telling yourself that you are going to risk $100 is different from visualizing a $100 loss. The latter involves actually picturing what your account will look like after the loss. More than that, think about the pain you will feel when you lose that $100. It isn’t a comfortable thing to do but I assure you that it is much more comfortable to think about it before it happens than to get blindsided by a loss you didn’t see coming. By visualizing the worst case scenario you effectively neutralize the pain that would otherwise be inflicted upon losing that money. No Surprises As human beings the number one trigger for an emotional response is being surprised by something, be it good or bad. Of course in the case of a trading loss we’re dealing with a negative event. Here’s an example to illustrate this idea. It’s your birthday and fifty of your closest friends and family have organized a surprise birthday party for you. You’re completely clueless to the event. In typical fashion, you walk into the room and everyone yells, “surprise!” Needless to say you will be surprised and perhaps even startled at first. Why? Because you weren’t expecting it. A surprise birthday party was so far beyond anything you had anticipated that you were completely caught off guard, which is what triggered the emotional response. But what if you had expected the party? What if you had been tipped off to the event and had therefore visualized what it would be like? It’s safe to say that your emotional response in this case would be far less extreme because you had already thought about the party – your mind would have been prepared to handle it. The same logic applies to trading losses. If you don’t visualize a potential loss it will inevitably surprise you when it occurs, and not in the way that a surprise birthday party does. The number one rule for any trader is to always have a plan, win or lose. By having a plan you never have to worry about being surprised by what the market does on any given day, and that gives you the upper hand. That Feeling of Déjà Vu/strong> The combination of traits required to become a successful Forex trader is different than the combination required for just about any other endeavor in life. Although it is beneficial to visualize yourself as a success, you also have to stay on the defensive by visualizing negative events such as losses. You have to learn to put your mind ahead of the loss. That way when you do lose (losses are a matter ofwhen not if) you will feel as though you have already experienced it thus making it much easier to control any emotions that are triggered because of the loss. Be sure not to get this confused with the visualizations you do to envision success. Visualizing a potential loss will not increase the likelihood of that loss becoming a reality. It will, however, help you manage any negative emotions that begin to surface as the result of a trading loss. Final Words Most Forex traders don’t blow up an account on a single losing trade. Most traders who blow up an account did so due to their inability to control their emotions after the single losing trade which caused the trader to spiral out of control. Every Forex trader experiences losses including myself. What differentiates the consistently profitable trader from those who struggle is not the losses taken but rather how he or she manages those losses after the fact. And the best way to do that is to prepare your mind for the event before it even happens. Losses don’t have to be viewed as something bad or negative. They can be one of the most constructive forms of learning as a Forex trader but only once you’re able to control your emotional response.

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