How to Handle a Losing Streak (everyone has them)

A trader emailed me a while back, asking for some advice on a good money manager for him. He said he was a "lousy trader" and tired of losing money. I doubt there is one non-rookie trader reading this story who has not experienced at least a small run of poor performance in trading futures. I've said before that most successful veteran traders have more losing trades than winning trades in any given year. The key is maximizing profits on the winning trades and minimizing losses on the losers.

I will also argue that at one point or another in most traders' experiences, they, too, have felt like "lousy traders." I certainly have. (Those who say they have never had a run of poor trading performance or felt "lousy" about a trade or trades are likely either lying or completely out of touch with futures trading reality.)

So what's a trader to do when losses start to pile up and winners become scarce. Here are a few tips that I've picked up over the years from some of the very best traders in the business:

 

1. Don't overtrade. If you are trading several markets and not having any success, cut back to trading one or two markets. You can follow fewer trades more closely and document your success or failures more easily. Plus, your trading account won't be drawn down so quickly.
2. Keep a detailed trading diary. If you keep a good trading diary, you can go back and see if there is a common thread among your losers--and your winners, and possibly make the proper adjustments.
3. If you are not trading that many markets and still racking up losers, take a break from trading for a while. Gather your thoughts. You may want to "paper trade" for a while to get your confidence back. Then, if you are still losing on paper, you will want to look for other trading methods.
4. If you are losing money trading, DO NOT (I REPEAT) DO NOT try to make a big home-run-type trade that will get you back to even or the plus side in a hurry. In fact, do just the opposite. Make smaller trades that risk less capital, until your performance starts to turn around and you can resume your normal asset allowances for trades. Successful traders survive the rough waters by hunkering down and being conservative.
5. Exhibit patience and discipline. I've preached about this before. Are you following a trading plan that you devised before you put on the trade? If not, you should be. You are not shooting from the hip (no exit strategy in place) once a trade gets initiated, are you? If so, that could be part of your problem. On the patience issue, are you impatient? I've talked to successful position traders who may only trade a few times a year, because they wait for what they feel is that "perfect set-up" to occur. If you are a position trader (as opposed to a day trader), you don't have to be "in the market" all the time. Wait for the good trades to develop and don't chase markets.
6. Be confident. Have faith in your trading methods. And if you don't have faith in your methodology, why don't you? If your methods are really not successful, find something else. Read some of the many books out there by the successful traders, and how they have traded successfully. But be cautious of the person who wants to sell you some so-called successful trading method for big bucks. (See the next item on hard work.)
7. Work harder. Don't expect to produce winning trades if you are not working very hard at trading. Do you know well the fundamentals of the markets you are trading? Even if you know technicals well, you should have at least a good understanding of a market's fundamentals. Here's an example: Let's say the charts and technical indicators look bullish for corn and it's the day before a major USDA report. Smart traders likely won't initiate a trading position in corn the day before a big government report is out.

In case you're wondering what I told the reader who emailed me and told me was a "lousy" trader, here's what I said: Don't give up just yet. The fact that he admitted he needed some help (before he lost all of his trading assets) is a positive first step. I then told him I would write this feature because there were likely many traders who feel the same way, at times, that he feels, and that there are steps to take on the road to recovery and eventual successful trading.

http://www.forexfactory.com/pics/art...im_wyckoff.jpg

Jim Wyckoff
TradingEducation.com

Never accept losing streaks! But to plan a lose for a bigger win, now
that is more my style!!

That is a very awesome post Jim and is a great way to address that. Yes, all of us go through this from time to time. I have been trading for over 5 years and I go through it at some point just about every year. I'm getting much better at handling it as time goes by. Now it usually means vacation time. LOL

Thank you for posting that. I hope many others read it and take it to heart.

I disagree (politely) with this charlyher. I believe that to be successful in this business, you absolutely must accept your losing streaks as simply a part of trading a system. If you have properly tested your system and it has shown to be profitable in the long-term a certain number of losing trades in a row and draw-down is inevitable. However, that knowledge of the positive expectancy of your system allows you to treat each trade individually and be comfortable with the outcome over a large sample without breaking your rules.

Check out some of FijiTrader's posts on here. Unacknowledged losses are one of the major psychological sticking points for traders and lead to inappropriate or unworkable solutions.

One of the most important rules I ever put to action in my own trading kills losing streaks. Had I not stringently stuck to this rule I truly believe I would not still be trading today.

If I lose 3 trades in a row I STEP AWAY from my charts. I take a few days off trading and come back with a clear head. This allows me to:

 

1. Kill the losing streak
2. Take a break and clear my head
3. Preserve my capital

I cannot stress this rule enough.

If you lose 3 trades go do something you love doing and don’t look at a chart for a few days.

Hi , I have been trading for about 1 and 1/2 years now with a few brokers and I have made alot of pips ,but for some reason I always turn around and loss all the pips I have made and then go to the margin , I wanted to ask is this forex thing setup up to make money . it seems like for some reason that you just cant keep the pips you make . I want to ask to is how many people can suggest weather or not its a money management problem ,and if so does anybody have any advise for me to better my trading . i cant keep the pips i win so many just to loss them ,, can someone help me ?

You situation is common to new traders (yes, one and a half years is new). Luckily, it doesn't sound like you are placing blame on brokers or corrupt market players or any of that nonsense so that is certainly a positive. The bottom line is that the reasons these things happen are entirely based upon how you approach trading from a psychological perspective.

The bottom line is that giving back to the market what you've extracted on a regular basis is usually a result of not properly acknowledging those winners and losers. This can be from a strictly psychological level or within your trading system but there is a ton of overlap there.

If would recommend reading Trading in the Zone by Mark Douglas for the proper perspective that should prevent these sorts of things from happening. The positive thing is that what you are discussing here is a very common problem with workable solutions. They are simple, but rarely easy.

Dude cheer up.....you have passed the first phase (maybe a bit late but its never too late). Now you have enough data to analyse your performance. Soon you will find the recurring mistakes in your strategy and the aha moment. It happens to all of us.....some pro people took 5-6 years to become consistently profitable.

Actually I recently started a thread about some of the reasons why it's so hard to be profitable.

http://www.forexfactory.com/showthread.php?t=205085

Hang in there. You might have to go back to the drawing board and rethink everything. The only way to definitely lose is to quit.

Hi , thanks guys for your words it is a great help for me .. hope this is not the end for me ..

I'm techincally in a losing streak, mostly because of psychological money management mistakes.

Fix those mistakes. Look at things from a longer term perspective.
Yes, it's nice and comfy and cozy to be profitable every day...but it's not going to happen. Be prepared for that mentally.

Trade smaller. Get your groove back.

Last month, I kept my stoploss solid on every trade, but traded bigger size to revenge trade. (mistake #98)

This month, I vow to keep my size consistent, and the second day of the month, I remove my stop on a couple trades. (mistake #99)

No doubt without these mistakes, even if I was flipping a coin for trade entry, I would have +200 more pips to my P/L.

Fix psychological mistakes (read Trading in the Zone again), keep the long term "big picture" in mind.

And try to have fun with it and ..."just Trade."