How To Maintain A Winning Streak in Trading

Every trader goes through winning streaks and periods of drawdown. No matter if you are trading with a million dollars or a thousand, every trader will go through both of these periods every trading year. Most losing traders struggle to be profitable not because of lack of winning trades. They lose because they let their losses during their bad periods wipe out their gains from their winning periods.

In order to become a profitable trader, you need to know how to get the most of winning streaks so you can survive periods of inevitable drawdown. We’ve talked in the past about how you can break a trading slump. Knowing how to maintain a winning streak in trading is just as important as breaking out of a trading slump. Here are 3 crucial tips to maintain a winning streak in trading.

1. Figure Out The Source of Your Consistency

Many new traders when they go on a good run of trades stop putting in the work outside of trading. They think they have made it as a trader, so they stop reviewing their trades and making detailed trading plans before the market opens.

It becomes harder to push yourself to work hard when you are on a winning streak than when you are in a drawdown. You have to fight complacency during winning streaks, and understand that these periods never last forever. Don’t be like most losing traders and stop putting in the work.

You have to push yourself extra hard during periods of success. Make yourself study all of your trades, and figure what setups are contributing to your success. Even when you are making money, you can still always be making more money and refining your trading. Making money doesn’t mean you aren’t making mistakes.

Do everything you can to capitalize during periods of successful trading so you can sustain yourself during periods when the market gets slow. Trading is the most scalable profession if you keep improving.

2. Remain Selective in Your Trading

When you are on a hot streak it is tempting to try to trade new setups, because you are feeling confident and cocky. You think that every trade you put on will be a winner. This is the exact opposite of what you should do.

Winning streaks, especially for new traders, are the result of being selective in your trading. You found a setup that you know you have an edge on, and you are capitalizing. Winning streaks do not come from being the jack-of-all-trades.

On all of your go-to setups you know the probability of success. On random setups, you have no idea what the probability is because you haven’t studied or gathered data on them.

Trading these setups is just pure gambling, and it is tempting to do when you are on a winning streak. Instead of trying to trade new setups you are unfamiliar with, increase your position size on setups that have been making you money already.

3. Know When to Increase Your Position Size

“Strike when the iron is hot”. Increasing your position size during winning streaks is imperative to long term success. When we say increasing your position size, we do not mean immediately double the amount of shares you buy. Increase it by 10%-20%, and gradually build it up.

Increasing position sizes too much in a short period of time will bring more emotions into your trading because you are not used to seeing these big swings in your PNL. If you add too much size you will likely destroy your winning streak and end up taking a big loss.

Most traders I know make the majority of their money during the trading year in just 3 or 4 months of the trading year. The other 8 or so months when the market is slow and choppy they decrease their position size and trade less to preserve their mental and physical capital. But when the market is hot they always dramatically increase their size.

Increasing their size during these periods is why these traders are successful. The gains they make during these periods sustain them when the market is slow. It becomes so much easier to stay on the sidelines and not force trades when the market slows down because you don’t have a need to try to pull money from the market to sustain yourself.