I lost 60% of my trading capital by day trading options, what should I do to recover my losses?
These are some of the steps I would take to recover my losses.
1. Take a couple of days off. This will keep your mind clear, calm, and open to new ideas. It will generate some optimism. Being in the same loss mindset will not help you.
Do what you enjoy. Because changing your current loss mindset is extremely difficult.
You’ll keep wondering what happened, why it happened, and what I should have done. Answering these questions will assist you in reviewing your trades, but ruminating on them will not.
2. I believe swing trading can help you recover your losses.
Swing trading is a trading style in which you hold your trades for more than a day in order to catch the entire swing. Anyone with sufficient knowledge can profit from this type of trading because it does not involve emotions and does not require precise time-based decision making skills. Swing trading stocks allows you to easily profit and recover your losses.
Assume you’ve lost 6000 rupees and have only 4000 rupees left from your 10,000 capital. What we can do now is buy two companies for Rs 2,000 after careful analysis and wait some more time. You will almost certainly regain some of your losses.
The harsh reality is that you will have to wait for a profit because swing trading stocks or equities does not give huge profits in a short period of time.
Swing trading in options should be done with extreme caution because options have time decay. If it fails to reach the target by the deadline, your option premium may expire.
It is a better option if you are swing trading in futures, forex, or cryptocurrency. There is no time decay, and you can keep it for as long as you want (also according to your strategy).
3. Begin backtesting and paper trading your strategy with all potential changes. Follow your risk management rules while you can practise the same strategy that cost you your capital and see where you went wrong.
After recovering half of your losses, return to demo trading or begin with a small account, lot size, or quantity. Then assess your progress. If not profitable, return to testing your strategy. Examine what is wrong.
4. Most of the time, the strategy will not be your fault. The error will be in managing your emotions or risk management. Even if the strategy is flawed, you can always learn from the numerous free online resources.
You should never return to intraday or scalping trading because you will become very emotionally drained after losing 60% of your capital.
So simply wait for profits to accumulate in swing or position trading and learn. You can learn all of the basics of technical analysis or whatever suits your strategy. You can make a good trading plan and stick to it. Then you can practise trading on paper or in a demo account.