Dealing with the Dreaded Losing Streak

Any trader who has skin in the game for a while has probably accepted that sooner or later, a losing streak is inevitable. No one is immune to them.

When the time comes and the market goes against you, different people react in vastly different ways. But the end result is all too often either overtrading, or cutting winning positions too early for fear of giving back profits. This pattern of behaviour occurs because we’ve not yet developed the discipline required to be a successful trader, long term. I’m not going to lie folks, it’s hard. And, it can take years to achieve it.

Often, the reason for a losing streak is caused by the lack of a trading objective. Furthermore, this lack of an objective can be caused by anxiety. When suffering from trade anxiety, a trader finds it difficult to follow his/her own rules. They cannot follow the trend, cut their losses, or let their winners run. This the most destructive, yet most common result of a losing streak. See, when a trader is suffering from these symptoms, it is likely there are one of two emotions that are flooding their psyche, stubbornness or reluctance.

Stubbornness
A very common trait of a lack of discipline, the stubborn trader won’t get into a position if others are in it. They don’t want to be considered a ‘trend-follower’. The stubborn trader believes they are more right than the market, forever the contrarian.

Reluctance
Another common condition that arises when inexperienced traders encounter a losing streak is the reluctance to resume taking positions. They think it’s too late to enter the trade, or think the setup is not quite right. They come up with thousands of reasons why not to enter a trade, never happy with the market conditions. Often the reluctant trader is a trader who is always looking for the holy grail trade strategy. Ie, the unicorn… a mythological creature that’s impossible to capture.

Wrapping it up
Some traders seem to thrive off the ups and downs of winning and losing. This addiction to volatility is more associated with gambling than trading, and if you identify that you’re experiencing this condition, take a break from trading. You’re not trading to make a profit, you’re trading to experience the emotional roller coaster. When you follow your trading rules, and persevere through the inevitable losing streaks, you’ll build even more faith in your strategy, which takes the emotions out of losses because you know your forex trading system is robust enough to bounce back.

Source: Vantage FX Blog