All going well then I hit three losing trades in a row….My confidence is shattered!

Trading performance

This week’s blog post is in response to an email I got from Dale about coping with losses and a plan for dealing with losing trades so it doesn’t impact on your future trading performance. I have broken the post up into part 2 parts and will post the second part of the response tomorrow. Three losses in a row and things start to get a little tough psychologically. In the time that I have been calling live trade rooms and coaching one-on-one you can feel the frustration and sense the disappointment when new traders hit three losing consecutive trades this can really challenges our psychology and trading performance. Even when we are reminded that trading is a game of probabilities and losing trades are part of that process……it never really feels great! So while experienced traders have learned to live and accept losing as part of the cost of doing business, how do new traders typically react when confronted with your first series of three losing consecutive trades, so what typically happens? I have used the example of three losing trades as this is what new traders are psychologically prepared to accept before they feel compelled to take action and ‘correct’ the situation in an attempt to immediately improve their trading performance.

For those of us who have been at this game for a while the cycle starts quickly after the third loss and we are immediately challenged with a number of physical and emotional responses that if not planned for can be disastrous. Our initial response is usually frustration. Particularly when we compare our trading with perhaps others in our group or trading network that are doing really well. What happens next usually follows along a very similar path for most of us who experience the consecutive loss phenomenon: • Blame – we start looking at things to potentially blame our performance on. This can be the system, strategy developer, broker but someone needs to be held accountable for these losses!

• • Doubt – Ok so we have just shelled out money for a system that is now broken? What if it is actually me and I can’t trade? How am I going to explain this to my spouse and continue to support my family?

• Fear –I can afford to loose more money, what will everyone say about me when they know I’m a loser? How can I tell my wife/husband that I’ve lost money again?

The feeling that comes over you as a new trader is almost paralyzing after a series of losses. It affects your ability to pull the trigger on the next trade as you start to second guess everything you are doing.

At this point most new traders do one of two things: Start tweaking the strategy to ensure the three trades would have been avoided. This is usually done by: 1) adding or removing indicators re that the modified version would not have triggered these losing trades;

2) Optimizing our trading performance; 3) Adjusting the trade plan or time of the day; 4) Adding an additional filter; 5) Completely dropping the system or strategy. Then the hunt begins for the next best thing that promises a high win rate with very few, if any losing trades.

So is that generally the right response to our three consecutive losers……..no!

We really want to avoid any trading decisions based on emotion. We need to think back and remind our self that trading is a game of probabilities and that is how we need to approach our decisions to ensure our trading performance remains true to our edge we have tested.. I look forward to taking you through my consecutive losses plan tomorrow and how to maintain your internal control while trading during a losing streak. Have a fantastic day and good luck with your trading day.

Cheers

Shane fry GMT Trading Coach www.globalmarkettrader.com

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