Six consecutive losses. Then, one huge loss and you gave back your entire month’s earnings.
You are paralyzed. You tried to enter another trade.
Order rejected. You do not have enough money left to post the margin. Demoralized.
A terrible session.
Sessions like that bring down your capital, both mental and financial.
No trader is exempted from the market roller-coaster. If you expect a smooth sailing trading career, you do not understand what you are in for.
There is no question that you will have terrible sessions in your trading career.
The question is whether you can bounce back each time.
#1: Identify the Problem (if any)
Terrible sessions do not always point to a problem.
You might feel awful about a trading session with four consecutive losses. But what if your simulation shows a good chance of having six consecutive losses?
Then, you have nothing to worry. As long as the losses are part and parcel of a sound trading strategy, there is no problem.
But when there is a problem, make sure you know what it is. And do not trade again until you figure it out.
The following aspects explain why you might encounter terrible trading sessions.
Unsound trading strategy. An example is low-probability reversal trades that aim for small profits. Review your trading rules.
Insufficient risk management. Add circuit breakers like a daily stop-loss.
Discipline lapses. This is the most common cause of terrible days. Ignoring your trading and risk management rules leads to your worst trading sessions. You might get away with it a few times, but these lapses will catch up with you.
#2: Stop Feeling Bad, Start Thinking Good
Feeling bad does nothing except making you feel worse than before. Instead of dwelling on your past errors, choose to think about future opportunities.
Look forward to the next trading session.
Don’t fear the next trading session. Also, don’t treat it as a chance to recoup your losses. Both are recipes for disasters.
Instead, think of the next trading session as a chance to do better.
Doing better is not about making more money. It means having better discipline and focus than before. Concentrate on the process and not the monetary outcome.
#3: Understand the Failure is Part of the Process
The Market Wizards had their share of failures before they achieved their current stature.
What matters is not how many times they failed, but how they bounce back each time.
Successful traders learn from their devastating losses and silly mistakes. Some of them need more than one lesson, but they never give up learning.
Accept terrible sessions as part of your trading journey. Once you do that, you will realize that bouncing back from defeat is not an option. It is something you must do if you want to be a trader.
#4: Give Yourself a Small Treat
Why should I get a treat after screwing up?
One of the barriers to traders bouncing back into action is the sense of failure. The saying that you are as good as your last trade is common, but not always sensible.
Giving yourself a small treat is a tangible way of telling yourself that you are okay. You can still afford that Chemex Coffeemaker you always wanted.
It is not the end of the day. It is just another day.
So let’s get on with trading. Do it better this time.
#5: Take a Break
Still not ready to bounce right back? Go for a short trip or spend some quality time with your family.
Never force yourself to trade again immediately. Give yourself some time to figure out what went wrong.
Staying away from the trading screen give you clarity of thought. Take your time and condition your mind before returning to the battlefield.
Remember that awful trading days happen to every trader. They do not make you a loser.
With the right perspective and the tips above, you can bounce back the next time you are down.