Every trader experiences a losing streak now and then, it’s just part of the trading ‘game’. However, if you find yourself in an extended losing streak or one that’s threatening to drastically cut down your trading account or even blow it out entirely, it’s time to reconsider your trading approach and take some responsibility for your poor performance in the market.
Whilst there is no one single ‘cure’ for all trading mistakes that will get you making money in the market immediately, there are some steps you can take that will get you pointed in the right direction. If you follow the 7 steps I’ve laid out for you below, you will be able to put an end to any excessive trading losing streak and get on the path to profitable trading much quicker.
1. Admit that you are (a big) part of the problem
As I’ve discussed in previous articles, our human biology basically makes us bad traders from the start. We are born and raised to feel such emotions as greed, fear, hope and regret, and all of these things essentially work against us as traders. Thus, the first step you need to take is to admit that you are likely most of the reason why you’re on this losing streak, accept this fact and figure out a way to overcome it. Basically, we need to conquer ourselves and our own human short-comings if we want to become successful traders, which isn’t very easy for most people to do. This is basically why trading is so difficult and why so many people fail at it.
Thus, if we can realize and accept that we are all basically biologically wired to fail at trading, we can turn that realization into a workable problem that can be solved by using our intelligence. Through proper planning, logic and common sense, we can learn to ‘get over’ ourselves, and that will allow us to successfully tackle other issues we face in the market…
2. Take a break from live trading for a while
The next thing to do if you want to cure your trading losing streak, is to simply stop trading live for a while. I know it seems like an obvious solution, but you’d be surprised how many people continue to trade and trade and trade, even if they are losing almost every trade, until they blow out their accounts.
This step, perhaps more so than any of the others here, can be the most difficult. By taking a big step back and not trading live for a while, you are basically admitting that you’ve been out of control and that you have been hurting yourself. However, until you remove yourself from the market, and more specifically, from the emotion of having real money on the line, you won’t be able to figure out what you’ve been doing wrong. You need to be clear-headed and objective to end a losing streak and to get your trading ‘ship’ ‘sailing’ in the right direction again. If you have to go back to demo trading for a while to do this, then that’s what you have to do. Accept the reality and suck it up or you will never move on and find lasting trading success.
3. Become a ‘bored’ trader
Quite frankly, if you’re not a bored trader, you’re probably not trading properly. Trading shouldn’t feel like a trip to an amusement park or casino to you. Instead, it should be a relatively boring, albeit interesting activity, if you’re doing it correctly.
The intense emotional peaks and troughs that a trader can experience are typically the result of improper trading habits or behaviour in the market. Yes, of course if you’re risking too much relative to your account size you’re going to get really excited when you win and really angry when you lose. But, if you want to make a career out of trading, why on Earth would you trade in this manner? Doing so is how you start losing streaks and blow out your trading account!
You need to boil down trading into its core parts; strategy, planning and acting on logic rather than impulse. If you do this, you will essentially be ‘bored’ as you analyse and trade the market, because you will know what to expect most of the time. That doesn’t mean you’ll know if you’re going to win or lose on any given trade, it just means that you’ve planned for a potential loss or win, so neither should be a surprise to you. Also, since you should be managing your risk properly and not over-trading, neither a win or a loss should be very exciting because you already know and have accepted how much you will lose or win on any given trade.
4. Be more consistent in your trading approach
If you’re experiencing a large losing streak right now, it’s probably safe to say you’re not taking a consistent approach to your trading. This goes along with point number three above about being ‘bored’ as you trade. Basically, you should have developed a trading routine that doesn’t change too much from week to week.
Each week you should analyse the major markets you trade, look for and mark any key chart levels, identify trend / market bias and then each day scan the charts for potential price action trading opportunities. If nothing is there, walk away until your next scheduled market analysis time. Taking a consistent approach to your trading like this by having a trading routine will help you eliminate impulsive trades and will keep you much more objective and clear-headed as you analyse the market.
5. Know your personal risk ‘pain’ threshold
How much money are you potentially willing to lose on any given trade? What’s the dollar amount that you can have on the line in the market and still sleep soundly at night? Have you ever even asked yourself these questions and answered them HONESLTY? If not, then it’s a big reason why you’re probably having big losing streaks.
Trading success is more about proper risk management than it is about basically anything else. Unfortunately, risk management seems boring to most traders at first, so they largely ignore it. However, ignoring it will always come back to haunt you. I’ve said in many other lessons; you’ve got to be a successful risk manager before you can become a successful trader.
Controlling your emotions as you trade and developing the proper trading mindset, begins with managing your risk properly. If you’re cranking up your risk per trade to a level that makes you glued to the screens and unable to sleep at night, you’re going to lose all your money very quickly.
6. Stop ‘peaking’ at low time frame charts
You can’t worry about finding ‘every trade’. If you do this you will surely drive yourself crazy whilst blowing out your trading account at the same time. Traders think that by analysing low time frames like the 5 minute or 15 minute charts, they will somehow increase their chances of finding trading opportunities and therefore of making money in the market. However, this is an illusion, because all you’re doing when you look at these low time frames is increasing the chances that you will take a low-probability trade and thus lose money that you otherwise didn’t have to lose.
7. Consider your trading strategy
Finally, if you’re trading the wrong trading strategy (or system), it might be contributing to your losing streaks in the market, or even to blowing out your account.
A trading strategy should be simple yet effective. You shouldn’t have to interpret 10 different indicators, read economic news and watch financial news on T.V. to determine whether or not there’s a trade in the market worth taking. You might be losing money because you’re analyzing too many variables and (or) trading too messy of a method.
How you think about and enter the market should be relatively straight-forward and uncomplicated. This, in part, is why I employ the power and simplicity of price action strategies in my trading decisions. Be honest with yourself, if you don’t even really know what your trading strategy is, or if you simply lack confidence in why and how you’re entering your trades …now is the time to have good hard look at what you’re actually doing.