Ever had a stretch of days or weeks where you couldn’t put on a winning trade to save your life? It gets to a point where you feel like the market makers are rigging it against you on purpose!
This where 90%+ of new traders’ careers end. They give up on the first drawdown. They interpret the drawdown as a sign they are a failed trader. But drawdowns are a necessary obstacle every aspiring trader must face on their road to profitability. Even experienced, profitable traders have to deal with losing streaks, usually at least once a year.
However, winning traders have specific, defined strategies to survive drawdown, and minimize the damage done to their account. In order to survive losing streaks, you need to take precautions to protect your trading account from yourself. In today’s post, we will give you some of my favorite strategies for surviving and conquering losing streaks in trading:
One of the most important things you need to do during a losing streak is to size down. A LOT. Most traders make the mistake of doing the opposite. They want to make the money they lost during the streak. They continue to lose because they become more emotional due to their larger size, and they dig themselves in an even bigger hole.
During periods of drawdown, you need to find a rhythm and rebuild confidence. It sucks cause losses come quickly, and they have to be slowly made back. But if you want to be a consistently profitable trader over a long period of time, that’s how you have to do it! Trading is a marathon, not a sprint.
This also goes contrary to the urge to make back the money you lost. You want to take more trades because you think it will increase the probability of your making your money back. Trading when you are low on confidence in emotional is the worst time to be increasing your market exposure. Dial back the number of trades you take, and focus on taking the best setups.
Narrow Your Setups
During periods of drawdown, you need to narrow down to just one trading setup. I call this setup your slump buster! This is your best trading setup, that has the highest probability of turning into a winning trade. You need this setup when nothing else is working.
In order to have a slump buster, you need to be tracking and journaling your trades. You have to know what setups you are having the most success with and be able to assign probabilities to every single trade you put on. Find out what your best setup is, and trade nothing besides that setup until you can develop consistency.
Take Time Off
Many times I have seen my students have trading slumps due to a choppy overall market environment, and they get chopped up and over trade. Even their slump busters cannot save them sometimes because the setup just isn’t there! One of the best solutions to drawdowns to get time away from the screens.
This allows you to clear your head, recollect your self, and wait for a more favorable market environment for your trading edge. The market isn’t going anywhere, and there will always be more trading opportunities.
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In addition to our 60-day trading bootcamp course, this bootcamp teaches you trading strategies for other instruments, including options and cryptocurrencies, and also gives you more 1v1 time with me!