Date: 8/15/2022
Author: Chris Hood
Aside from your account value, the most brutal hit you’ll take from a string of losing trades is a LOSS OF CONFIDENCE.
It’s a discussion that comes up frequently with my subscribers.
Even when they’re using a winning system, such as the one I teach, losses cause you to second guess even your strongest setups.
You’ll hesitate when you see the signals.
And over the next few days, watch dejectedly as the ticker moves precisely in the direction that would have made you some nice gains.
It’s not a great situation to be in.
I know because I was exactly like that when I was learning this game.
It’s just like having a bad week on the jiujitsu mat. Every time you try a bit of offense, you’re just a second too slow, and you land up getting smashed by your training partners.
You start assuming that nothing will work.
And because your mind is clouded by that thought, it doesn’t. So your commitment to each submission attempt fades, and you’re just laying there doing nothing before long.
So how do you get your mojo back?
What exactly should you do to get yourself back on track and into a winner’s mindset?
Here are three tips that have helped me the most.
Critical financial analysis and winning stock tips you can’t afford to be without.
First, make sure that your signals and strategy are still valid.
Analyze the market and see if it has changed in some significant way. Then, ask yourself, have we moved from a powerful bull trend into a period of choppy consolidation?
Or has the market, in general, become bearish?
Specific strategies and time frames work best in particular markets but come up short in others.
For instance, selling two-week expiration credit spreads can be a good play in a steadily rising market. However, they can leave you beaten and broken in a volatile and uncertain one.
Second, if it isn’t the market, it could be that you aren’t following the rules you set for yourself.
Self-criticism is never easy, but it’s essential.
Go back over your training journal and note if you stuck to your plan or not.
All traders go through this, especially early in their careers, so don’t beat yourself about it.
Is greed keeping you in trades too long or making you risk too much?
Perhaps it’s a determination to be correct about your trade idea which makes you unwilling to get out early enough from a potential loser.
Or maybe you had a string of successes and just got too overconfident.
Just when you feel the best about your abilities is usually when the market hits the hardest. But whatever the problem, it is fixable if you’re honest with yourself.
Finally, you could be doing everything right and still suffer a series of losses.
Even if your system has a historical win rate of 75%, winning and losing are always a function of probability.
Understand that even winning methods have periods of losses – no trading method is 100% accurate.
Accept this, and when several trades move against you, you can handle it.
Take a deep breath, size your positions smaller, and ease back into your rhythm.
Mindset is one of the most underappreciated aspects of trading and can make or break you. So when your head is full of doubt, take a second to get back on track.
Cheers,
Chris Hood
