How to Crush a Trading Slump

The definition of a slump is “to fall or sink heavily, to decline suddenly, to perform poorly…” If you have been trading longer than a few months, then you have probably experienced a trading slump. Everyone has, right? Even baseball players get into slumps. Albert Pujols, one of the all time great hitters in major league baseball, started his career with the angels with more strikeouts than hits. His batting average was .143 and he was certainly not getting paid $250 million dollars  for his defensive skills, yet all he could do was strikeout.  No matter how good of a trader you are or become, you will have trading slumps!  Slumps occur because you are now doing something that is mechanically incorrect or  you are no longer doing something that you were doing correctly.  Trading is an extremely tough job mentally – I promise you that! However, the one thing that separates successful traders from unsuccessful traders is how you overcome those trading slumps. I get emails every now and then from people telling me they are having a losing week or month and what should they do about it.. well here is my advice:

1. Make adjustments. Rather than focus on the entire problem you are having, start by breaking it down trade by trade, piece by piece until you figure out where the actual problem is occuring. Are you not taking profits fast enough? Are you letting winning trades turn into losing trades? Have you strayed from your go-to setups and started taking trades outside of your plan? Dissect each trade that’s causing you to be in a slump and figure out why.

2. Be patient. Review your strategy…figure out what you are best at and only take those trades for a few days. Maybe you have a history of being really good at trading flag breakouts and really bad at shorting. Cut out the shorts for now and stick to the setups that you know how to trade and that have proven to be winners for you in the past. Hit the first good setup that you see and repeat that setup over and over until your back on track. Repitions are the best remedies for slumps.

3. Take a break- If you are in a trading slump it might be due to a lack of focus. Meaning, you took a big loss on a trade and now you just want to get your money back. So instead of being patient and getting your loss back slowly with setups that you have mastered, you jump into a random trade or you go too big position size and you only make matters worse. This is something you have to learn to avoid. Poker plays refer to this as “being on tilt.” Anytime that I am having a bad trading day, Kunal tells me to quit trading and go do something else. Take a breather, relax, refresh your mind, come back the next day prepared and ready to start over.

4. Believe in yourself. If you have taken the courses, studied the setups, learned the methods, then trust those things. Believe that the methods work.

Pujols came out of his slump with a walk off home run.  All traders go through trading slumps; hang in there, make the adjustments, be patient, believe in yourself, and you will get back on the right track. Get to work!


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