The losing streak- sooner or later it happens to everyone
When the market goes against you, different traders react in a different ways. The end result is often either overtrading or too early withdrawal from winning positions. Such a pattern is likely to persist until you develop great discipline routine. It is hard and sometimes takes years to master. That is why I believe my past experience might be beneficial for you. As you have seen, I do try to give back as much as I can in the form of information in my articles. I believe that the more I give back, the more I would receive. In the end, my prize would be to keep receiving more and more letters from subscribers thanking me for the help given.
Now, back to the topic- how to cope with our losing streaks.
In marathon running it the process is known as “hitting the wall“; in baseball, it’s a slump; in trading- it is the opposite of being “in the zone“. Sometimes the reason for a losing streak or a stopping point can be the absence of a trading objective. Trapped by anxiety issues, the “stopped trader” cannot follow the market trend, cut losses or let winners run. In such a state, the trader cannot follow his/her own rules, which is the most destructive feature of the losing streak. When the trader is in such a state, he/she is going through one of two emotional conditions. The trader is becoming either too stubborn or very reluctant.
A) The Stubborn Trader in a Losing Streak- a well-known condition among undisciplined traders is the state of stubbornness. The typical stubborn trader won’t get into an FX (or any other) position if others are in it. The stubborn trader does not want to be considered as a trend-follower. The stubborn trader cannot take as granted that the market is the always right. The stubborn trader always wants to be contrarian, especially in trending markets.
B) The Reluctant Trader in a Losing Streak– another well-known condition among inexperienced traders is the reluctancy to take positions. A well-known condition is one when the reluctant trader believes that it is too late to enter into a trade. The reluctant trader would always find 1001 reasons why not to enter into a trade. The reluctant trader would never be happy with the market conditions and will always try to find a reason why not to enter into a trade. The reluctant trader is the one that is always looking for the holy-grail trading system– or the one that doesn’t exist.
To sum up, some traders are addicted to the ups and downs of winning and losing. Those traders are like gamblers- if you can spot this mental condition in yourself, you’d better stop trading. You are not trading to win, but trading to experience the emotional roller-coaster effects associated with the role of the dice. To be considered as a trader who trades to win, you should know when you have reached your stopping point. You should have your own subconscious or clearly stated daily stops. You should always follow your rules and never give up- especially when your trading system is in a losing streak. This is the best time to test how good your trading system is and whether you are really in the trading game to win.