How to Break a Trading Slump

Every trader has periods when they aren’t performing well, or when outside influences disrupt their rhythm and wreak havoc on their mindset and their results. Trader Toni Hansen tells how to weather these rough patches and get back on track.

Even successful traders can go through periods where they are not trading well. Maybe they have something on the outside that is affecting their performance. 

Our guest today is Toni Hansen to talk about what those things are and how we can work with them. So, Toni, I know everybody goes through periods when they are not trading as well, when they’re struggling. How do you get through something like that? 

I think one of the things to start with is to be able to identify from the beginning that something is off and something is going to be affecting your ability to concentrate on the markets.

One of the disadvantages of trading is that you are the job. You are the boss, and if you’re not performing, you’re not making money. It puts a lot of stress on a person in addition to what else can be going on in their life. 

So, if you’re trying to trade and you have something, such as the death of a family member or something else— even like a big move to another city—it can really affect your ability to concentrate on the market. If you just keep plowing along, a lot of times those outside emotions will spill over into what you’re doing in the market.

You’ll think that you can compartmentalize it, and some people do it to a better extent than others, but it can really exacerbate problems.

It can make your losing streaks longer. It can make it more difficult to focus on taking the correct exit. So even if you’re making money, you won’t be performing necessarily as well as you would have otherwise, and a lot of times you can become stressed out about the fact that you need to be earning a living while all of these other things are going on. 

People in a regular career, they’ll have a couple of weeks off during the year that they can take time to deal with situations. Well, if you’re in the markets, one of the things that you need to do is plan that there are going to be periods in the year that you’re just not going to be on top of things like you would any other time, and you don’t want to just make it like “Well, this is vacation time.” 

You want to plan ahead for unexpected life events and be able to make it through that.

I think a lot of traders really don’t do that. They just come in and plug at it day after day, and that’s their life, and then they get hit with something and it just can really throw them for a loop. So, you have to develop that mentality more like any other career.

So does your trading plan say to step away for a week, or to reduce your size by half? What do you recommend?

Well, it really can depend on what’s going on. If you have like the death of an immediate family member, it could take you a couple of months to really deal with that, especially if you find that you need to go and help care for that person.

Being the trader, if you’re the one who is at home and you have the flexible schedule, a lot of times you’re the one that is expected to take care of that sort of thing. 

When you’re working in an office, people don’t have those expectations of you. So, when you’re an individual trader and you’re just trading from a home office, that’s one of the things that you do have to deal with. Your life is interrupted a lot more than somebody in business, and you can plan it to some extent. 

You can put aside money for living expenses for so many months, and that’s something everybody should do anyway, but a lot of times you feel like you’re not being productive and that you need to be in the markets. You need to accept the fact that you don’t have to be in the markets all the time. 

Really, what I do is I end up stepping back. So instead of following the markets every day, all day, I’ll say “OK, I’m just going to come in and trade the morning, and then I’ll deal with everything else the rest of the day.”

That can help keep you focused, or you can back away and say “I’m just going to swing trade for the next couple weeks and hold things for overnight plays instead of trying to follow everything all day.” 

So you can adjust your strategies to what’s going on, and that’s another way of really making things work.