Restore Your Confidence in Trading After Losses

Sep 18, 2023

It’s nice to have some sense of confidence that you can succeed when considering doing something new, especially something challenging. Some sort of reassurance that your efforts won’t be in vain. After all, who wants to invest time and effort into something without the belief that success is attainable?

Under normal circumstances, when you’re learning new skills, for instance, you typically see gradual improvement after a few tries, which boosts your motivation and builds your confidence. This makes it simpler to advance and finally enjoy the results of your efforts. 

However, trading rarely follows this pattern.

If you've been trading for a while, you're likely familiar with the frustrating cycle of brief successes followed by setbacks. It's a cycle where you begin to break your own rules, lose control, and watch your profits slip away. Before you know it, you're right back where you started. This situation can be incredibly perplexing because, despite initially feeling like you had a grasp on it, you now question your own competence. And this is how most traders start to lose their confidence in trading.

Over time, achieving consistent results in trading may feel like an unattainable goal, with each loss eroding your confidence and causing you to doubt your skills as a trader. Doubts start to creep in, and you find yourself second-guessing every decision, wondering if success in trading is even possible...

And when that happens, it’s time to become your own one-on-one trading coach and shift your focus toward regaining and strengthening of your confidence in trading.


What does it mean to have Confidence in Trading, and why it's so important?

Depending on who you ask you might get a different answer. But regardless of the precise meaning people give to
confidence in trading, everyone gives it a lot of weight. Because if you are confident, you can do far more in life than if you doubt your abilities.

It’s a lot simpler to believe you can accomplish something if you have already done it before. It doesn’t have to be something identical, but it could be just a task of comparable difficulty.

The bottom line is, you have shown yourself that you are capable of success.

One of the things traders tell me when they ask for my help is:

I think I can make this [trading] work. I’ve had success in a lot of other things. I simply need to regain my confidence in trading.

It sounds like you?

The issue is that if your confidence in trading is built on your previous experience of making money (for example in a different industry), then when you take losses you not only lose money but also shatter your confidence.

Maybe you can see how basing your confidence on your competence in trading does not work in your favor and can quickly lead to self-doubt.

Additionally, the market will frequently test this type of confidence because the conditions are always changing and you might not have any prior experience to draw on.

On top of that, because trading is a probability game where past performance does not guarantee the same results in the future, you need a different kind of confidence to be able to play it.

You must have faith in the effectiveness of your efforts, and that your efforts will lead to results. This is a confidence in trading that stems from a more fundamental place - the belief in who you are as a person. Who you are, not what you are capable of. It’s a difference between doing and being.

Just to give you an example: even if you think you can get out of a losing trade if you don’t trust yourself to do so when the time comes, you could end up riding the loser all the way to a margin call. 

Because of this, it is crucial for you to develop the kind of confidence in trading that will stick with you no matter your skills or your performance as a trader.

Simply believe in yourself. Because, if you believe in yourself you can achieve things you have never done before.


Rebuilding Your Confidence in Trading: A Three-Step Plan

If you’ve lost your confidence in trading at any point in your journey, follow the three steps below to restore it. 
Although I’m sure there are a lot of alternative approaches, this one worked really well for me and my students. So put on your one-on-one trading coach shoes and let’s get to work!


Step 1: Get clear on why you want to trade


Clarity is a crucial element in developing confidence in trading. Find the reason for doing something that will bring you out of bed every morning singing. The “WHY” behind your motivation that gives you energy and joy. Do you know that deep-down feeling of “I really, really want it!” which is so intense that it’s nearly difficult to put in words why you have it? 

The strong WHY is the fuel that helps to push through the obstacles on your journey and the resistance you might feel sometimes. 

So, pause for a moment, grab a pen and piece of paper, and ask yourself: 

  • Why do I trade? What do I like about it?
  • Why do I want to be a trader? Why is it important to me?
  • Why do I want to trade for a living? Why not earn money from other, perhaps easier and more relaxed job?

Consider the current benefits of trading rather than what you hope it will provide you in the future. This is not about the results. 

Once you get clear on why you want to trade, move on to step two.


Step 2: Convince yourself: “This is going to work!”


Here, you want to make sure that anyone can make you question if investing your time and energy into something – in this case, trading – makes sense or not. 

Of course, you might not feel particularly convinced about putting in extra effort, if you have been experiencing losses. But you can’t expect any results if you don’t put any effort into it. 

However, just effort isn’t enough.

You need effort with strong conviction. Your confidence in trading won’t get stronger if you adopt the mentality that doing something is better than doing nothing. It will be the exact opposite. Because you’ll only use that as a justification later: “See, I did try and it did not work”. 

If you want to build your confidence in trading - you cannot try. You have to give it your best shot. Go for it. 100% convinced it’s going to work.

As Yoda said:

“Do or do not. There is no try” [Star Wars] 

So, grab a pen and a piece of paper and divide it in two. 

  • On one side, list all the reasons why you would fail as a trader. Then consider whether each reason is actually true. Here, you might come across certain self-sabotaging beliefs that prevent you from feeling confident and limit your potential. 
  • On the opposite side of the paper, list the reasons why you will succeed. You can use those as daily examples of positive self-talk to help you increase your confidence level.

Keep in mind that we are our own worst adversaries. Therefore, once you start doubting yourself, immediately get into your one-on-one trading coach role and look for counterarguments to strengthen your conviction.

Once you feel you are ready to give it your best - go to step three.

Step 3: Prepare a game plan you can commit to 

All achievements are mostly attributed to commitment. In essence, it means that you fully dedicate yourself to your game plan. And that’s when things frequently go wrong since commitment means obligation and responsibility. This might feel like your freedom is being constrained, because when you totally dedicate yourself to anything your choices are in fact predetermined. There is now a duty to fulfill and that calls for restraint and discipline.

Considering that most people get into trading to gain freedom, this fact might come as a shock. Nonetheless, trading for a living and having a high level of self-confidence requires a high level of self-discipline. 

People are considerably better at honoring their promises to others in general. But we often give ourselves greater leeway when it comes to keeping the commitments we make to ourselves.  In other words, we become more relaxed, break a rule here and there, and look for excuses. Because we demonstrate to ourselves that we are unable to keep our word, this ultimately undermines our confidence. Your mind tells you: I don’t trust you.

Unless you start to slowly rebuild your self-trust, you can be trapped in this vicious circle forever. Start with small steps that you can actually commit to. By building your game plan this way, you’ll increase both your discipline and self-confidence.

Therefore, spend some time this week considering where you want to take your trading over the next three months. 

  • Make a list of all the steps you believe you might need to take to get there. Make the game plan.
  • Try to break them up now. Turn them into actions that you believe you can complete. What is it that you CAN DO, List step-by-step actions to move forward.
  • Schedule those tasks. Be realistic, so that you actually can do it. You need to start demonstrating to yourself the value of your word.
  • Focus on the process as you follow your plan. Make a commitment to complete every small task. The journey is made up of small steps. 

Small Steps, Big Results

When you have all those three steps nailed down, you will start seeing the results right away. Not just in terms of how you feel about yourself, but also in terms of your attitude towards yourself and your future as a trader. Don’t skip a step. They all support one another. You will find it challenging to commit if you lack clarity and conviction. Without commitment, you will begin to doubt your purpose. And when you question your WHY your conviction will wane. So, if you want your dream to become your reality – take action and put in the work.


If you're looking for personalized help to regain your confidence in trading, you can schedule a free call with me right now and check if you qualify for my mindset coaching program The Confident Trader