Trader Psychology : Being a Loser… Knowing How to Deal with Losing Periods

Today I wanted to write a post about one of the most critical aspects of manual and automated trading : the ability to deal with losing periods. It is very interesting how for most people (me included) it is extremely easy to deal with profitable periods but the instant that balance drops below the profitable margin we start to get into a psychologicaly different mood. Different people react differently to losing periods but usually the general reactions are the same. When facing loses, people start to make an incredible amount of mistakes in folllowing their trading systems or methodologies. People trading automated systems usually take them off their platforms and start to search for new ones, people trading manual systems start to make very emotional entries with exceedingly high risk levels.

Definitely one of the hardest parts of trading is dealing with the fact that your trading is not perfect and the market is not always aligned with your expectations. Every trading system in the world will go through draw down periods and more often than not these draw down periods are extensive and will deeply test the psychological strength of the person trading them. Going into draw down is a natural consequence of trading and it should not affect the way in which you trade. The key is simply to deal with each trade as if it was the only trade you had ever taken. The burden of previous trade results should not put a strain on your mind.

Of course, easier said than done. People find it difficult to follow a strategy which has been giving them loses mainly because they start to doubt the system they are trading. People wonder if the system will put their account into an infinite draw down spiral which will blank their accounts. Here is when confidence and knowledge become the decisive factor in the trading of systems and methodologies. Do really understand your system/method and its profit/risk targets ? Do you have enough confidence in your system to continue trading it despite the loses you are getting ? Certainly these are questions which a person should know the answer to if he or she wishes to be successful in trading. When you are in a losing period ask yourself the questions above. If you don’t have the answers, then probably you should study your method or system more in depth or change to a system/method you truly understand.

I have to say that I’ve found that the ability to trade through losing periods without making changes to their trading methodology/system is one of the main reasons why profitable traders are profitable and people who lose end up losing their whole accounts. Profitable traders do not increase their risk level when they trade and they do not make emotional entries when they have their accounts in draw down, something which people new to trading jump to when the psychological stress of being losers starts to take a toll on their emotions. Remember, take each trade like if it was the only trade you had taken, manage all trades equally even if your in a draw down or profitable period. Keep you risk targets small and your risk to reward ratio favorable.

If you would like to learn more about autoamted trading systems and how to trade them successfuly despite the psychological pressures by truly knowing and having confidence on their trading logic please consider buying my ebook on automated trading or joining Asirikuy to receive all ebook purchase benefits, weekly updates, check the live accounts I am running with several expert advisors and get in the road towards long term success in the forex market using automated trading systems. I hope you enjoyed the article !

Print Friendly, PDF & Email
You can leave a response, or trackback from your own site.

Leave a Reply

WordPress › Error

The site is experiencing technical difficulties.