4 Ways To Fight A Losing Streak
By David - November 01, 2020
Human psychology is wired in a way where it focuses on the negative more than the positive. So, in a zero-sum game like trading, you’ll never win if you decide not to master handling losses.
If your losing streaks whenever you trade are starting to get to you, the best thing you can do is to practice managing what you control:
Your next actions and yourself.
Before you see ways to fight a losing streak, you need to know how to not make it worse…
You’ll be fighting a futile battle if:
- You’re over-sizing
- You're emotions are clouding your judgement
You must control these to make sure your long-term vulnerability is limited.
Think about it like speeding in a car.
You have full control over your vehicle to take it to max speed, but suddenly as you're weaving in and out of traffic your margins for error have shrunk. One unexpected move by another vehicle (the market you cant control) and you could crash (liquidate your account).
You’ll be dealing with higher fees, bigger losses, and stress levels that mess up your thinking.
Having stress levels that require too much brainpower can easily overproduce the hormone cortisol. This hormone is responsible for making you forgetful — enough to make you forget your own trading plan.
This is why traders have so much clarity after exiting trades, and can’t figure out why they keep making the wrong decisions.
Once you've taken care of position sizing and account risk management, you’ve automatically put your emotional odds in your favor.
Having this unseen advantage will make it easy to implement the tactics that fight losing streaks.
So below, we’ve constructed a list of key things to know and direct actions to follow whenever facing a losing streak.
1. Acknowledge That its OK to Lose in Trading
You must be ok with uncertainty in trading. Overcoming that its ok to be wrong will be a big step forward for you. A trader with a 34% win rate, can still be profitable:
- 34% win rate,
- 3 RR (risk-reward) strategy
- An account risk of 2% per trade
It would take 100 losses in a row for your account to be in jeopardy — lose 100 trades in a row, then consider a career change.
Having just 3 losses in a row will be okay as your account will be in profit if the next trade is a win.
So, whenever dealing with losing streaks, remember that a low win-rate, high RR, and a small account risk per trade is structuring your account to be profitable long term.
2. Use Your Stats To Find Out How Long You’re In Winners and Losers For
After experiencing losses in a row, you may desire to go against your trading plan or bend some of your rules.
The losses make you feel justified for doing so but knowing your trade duration statistics will make it easier for you to stick to your plan.
Trade Duration Stats: A statistical report showing the correlation between time and winning/losing trades
For example: In CMM, the trade duration report shows how long you’re in winners and losers for:
So now, if you saw something like this before taking another trade, you wouldn’t make decisions to flip flop between directional trades in short bursts of uncertainty. Read the chart, and if there is a trade there, stick to a single plan
The more trade data you have, the more you should be convinced of using this as a confirmation to stay in trades until you’ve met your risk or profit target.
3. Leave The Screen And Set Price Alerts
Losses can increase the level of attachment to your next trades — you’ve got to diffuse this as quickly as possible. THE MARKETS ARENT GOING ANYWHERE.
Watching the price bars go up and down can play on your emotions, and if it strongly goes in the direction you don’t want, it will remind you of the previous loss you just took.
That alone can force your hand to make the wrong decisions or go against your trading plan.
Remember, you can’t control the price but its visual movements can control you.
The best thing you can do is take your attention off the charts altogether. Go for a walk, or a bike ride, or anything totally unrelated. It's easier said than done, but this is part of the challenge. You should WANT to keep your emotions in check, and well balanced when playing with your real money.
Just set alerts on TradingView whenever the crypto you’re trading goes above or below a certain price worthy of attention.
That way, you won’t allow the charts to take advantage of how you’re thinking and feeling after going through losses.
4. Accept The Fact That Trading Is Speculating
Every moment in the market is unique. As you’ve heard before — “Past performance doesn’t guarantee future results”
So, if you’re speculating like every other profitable and unprofitable trader, losing streaks is just something you have to accept.
Plus, during a losing streak, you may think that your trade setups aren’t appearing as they should or be discouraged when you enter a trade and it goes into drawdown (so you close it).
Here’s how to disarm that mental bias:
Below, there are 2 variations of the same strategy (Breakout Retest 15-min BTC).
As you can see above, the first one took a long time form and had a larger drawdown, while the second one formed quicker and hit profit targets right away.
The next time this strategy appears, it’s likely it will have its unique variation.
So, whenever you’re going through losses and feel your next setup is showing signs of being a loser, remember that the market is always plotting a new visual chart.
The best thing you can do is be committed to your trades and accept whatever outcome.
Being consistent with your strategy renders all losing streaks harmless in the long run.
How To Memorize These Tips
It’s worth having these tips stored in your subconscious and on your conscious mind when trading.
Just knowing them isn’t enough — the high-performance nature of trading can make it easy to forget effective ways to manage losing streaks.
Here are some helpful and easy ways to memorize these tips:
- Write them down on paper, and keep the paper on your desk
- Have them as a wallpaper for your phone
- Bookmark this post
- Journal it on CMM
The more you practice handling sequences of losses, the better you’ll get as your account grows.
Don’t let losing streaks stop you from being profitable.
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