Losing Streak/Trading Slump are inevitable in trading.A losing streak can be a sustained draw down in capital, where loses occur day after day, or a losing streak can even be a period of low returns where you are just doing breakeven.
As market are dynamic in nature and a change in trend of market which does not suit your trading style can lead to big losses if you are unprepared how to deal with them. Current move in Nifty where its trading in small range from past 30 days or even S&P 500 is having the smallest trading range seen in last many years, If you are not prepared to handle such market condition, you can see a big blow in your trading account and can lead to losing streak which can last several weeks/months.
What defines a Professional trader is How he is able to deal with this period of losing streak, As the saying goes the Harder the time more tougher you becomes. If you’ve been trading for a while, then I know you can relate to what I am talking about here. Consecutive losses put you in a state of ‘panic’ which severely degrades your decision making process.
Here are some tips you can take to stay positive during a losing streak:
Do not act on your Emotion and do Impulsive trading
First thought which comes to mind is recovering the losses ASAP as you are bound to take emotional decision. During Losing Streak you should try to be more conscious of your trade decisions. When you trade with desperation you’re going to make poor choices, and the market will exploit those feelings and use them against you. You can do this by MINDFULLY taking your trading decisions. Being in tune with your own emotions can put you in tune with the market, and enable you to get an edge from it.Best thing that you could do is stop the Impulsive trading. The only way you are going to be able to differentiate between consistent trading and impulsive trading is if you have a plan. If you don’t have a plan and you lose a trade, it means nothing.
Going Back to trade and Understanding the condition at that point of time
Having a detailed trading journal should come in handy at this point, If you do not have start maintaining it from today. By keeping track of the proper trade decisions you’ve made and the profitable setups you’ve taken, you’ll be able to identify which ones are effective for you. Also try to write down How you were feeling before you took the trade. Your sleeping and eating habits plays a very very crucial role in trading. At least 6 hour of sleep is MUST,else you are trading in drunken state of mind. Try to make note of everything which worked out for you during winning streak and try to replicate the same in your losing streak.
Find your trading edge
Another big part of bouncing back from a losing streak is simply understanding that any one loss or even a string of losses, is insignificant in the longer-term scheme of your trading journey.Many traders make good money when market are volatile and many trader i know personally work best in such sideways low volatile market. Every trader need to find his edge, and if market is not moving as per his/her condition its always good to learn new things/trade is less quantity and reduce your expectation till things turn in your favor.
Consistency is the key to success and will be a vital component when recovering from a losing streak. Don’t shoot first and think later, plan your trade with a clear mind then trade your plan. Stay focused and positive, trust your trading skills.