I expect the S&P 500 index to trade between the recent high and low for a while, several weeks o...
How to Stop a Losing Streak
05/17/2013 10:00 am EST
All traders have losing streaks and Jennifer Thornburg has some suggestions on how you can get back on the right track.
Our guest today is Jennifer Thornburg. We are talking about a situation all traders find themselves in at one time or another: Losing money and trying to stop that from happening going forward. Jennifer, give us some strategies and ideas. If I am losing money-maybe I have lost two or three trades in a row-and I am really hesitant to take that fourth trade because I don't want to lose more, what should I be doing?
Well, I think the best thing that you could do is stop the random trading. The only way you are going to be able to differentiate between consistent trading and random trading is if you have a plan. If you don't have a plan and you lose a trade, it means nothing.
If you have a plan and you lose a trade, you can identify; why did I lose it? Did I fail? Did I fail to follow my own rules? Was the setup not good enough? Did I miss something? Was there some indication that would have kept me out of the trade, or did the trade just fail?
Analyzing those results, you are going to find out that there are a lot of failures and a lot of losses that you can avoid if you just pay attention to why you are losing. Instead of giving yourself a pass every time you lose, keep notes on everything that you do so you can go back later and analyze why you were losing-because there is usually a reason-and not give yourself a pass.
Yeah. For any individual trader, I know traders would love to be able to find out why this went wrong and this is why it didn't happen; but sometimes you're right. There are just times that trades don't happen and you lost but I guess over time, there might be a pattern that you would see.
Right; and you know another trick of the trade that might be helpful-that was certainly helpful for me-is to make it simpler. If you can't find a reason why you are losing and it just seems like it is just too overwhelming, then tighten up your system. Remove a few of the technicals and make it a little bit simpler. Make a smaller profit target. Take it back until you strip enough things away that you get something repeatable and the losses slow down; then go forward from there.
What, I guess, I am saying is, it is really hard not to mix strategies together and to have lots of different ideas influencing your decisions to enter a trade or to exit a trade. In order to figure out what you are doing and why you are losing, the only way to do that is to start peeling back the layers of what is going into your trading and then make it as simple as you possibly can; find something repeatable, and then you can go forward from there.
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