How to Come Back After a String of Losing Trades // Ep. 86

In This Episode

• See yourself from outside of you
• Why you should track your trading emotions
• How to squash a bad habit

How to Make a Comeback After a Losing Streak

Traders can make poor decisions when they are on a losing streak. They lose confidence and some try to make back all of their losses on the next trade. This leads to over trading and usually a blown out account.

Learn strategies for preventing unprofitable decisions after a losing streak and how to get back on the winning track.

Read the Transcript

Hugh: Hi, Walter. Somebody wrote in and asked, “Why do I keep making mistakes after a streak of losers and what can I do?”

Walter: There’s a couple of things that I would look at. I would look at your emotional context when you are making these decisions and also the mechanical aspects of your system. How you are executing. So you need to score yourself on how well you are entering a trade and exiting your trade.

Also, managing your trades if there are management decisions like moving to breakeven. Having a journal where you are writing about your feelings and your thoughts during the time. You can probably pinpoint other things going on in your life that may be impacting your actual trading execution.

Those are two pretty common things. You may find for example some traders, like me, we get really over confident when things are going well. So right now I am currently in four trades and they are all going quite well. So it will be easy for me to see another potential fifth trade and get excited. In fact I did this morning and got excited about it, do you know what I mean?

Maybe even take it even if it was not up to par according to your rules. So that is an issue for me. The other side of that is that you know you have a lot of losing trades and then you might just want to make all that money back as quickly as possible. So you might add too much risk to a subsequent trade or something like that.

There’s a lot of ways to look at this. Typically, it is the emotion that is impacting the execution. So what happens is you are going to attach the outcome of those trades. You have a lot of bad outcomes and so that impacts your decision making. Or, the other side of that is you could attach the outcome of those winning trades and that again impacts your emotions and your decision-making. When you are deciding on how to execute the next trade or the next chunk of trades. That is how I look at it. What are your thoughts?

Hugh: It all comes down to, if you are executing correctly like you said and if you are not then figure out why. If you are then keep going. It is easy to get into that spiral of, “Oh, poor me. I will just try to make it up quickly.”

Walter: The catastrophic thinking. Where you just say, “Oh, I will never make it. It is never going to work for me. Blah, blah, blah”. Exactly right. You can stop that with logical thinking. You can have a trading accountability partner to talk to about that and they can help pull you out of it. There are a lot of techniques actually.

I’ve been thinking about making a course on this. Just on this issue of building up your resilience and stuff because I think it is really an important thing. I think in some ways like fortitude and the desire to make it work. I mean, to make trading work for you is important and also with that would be like resilience. They are kind of related in a way.

I think if you  have those things then you will figure out the system. You will figure out the risk management. You will figure out the psychology as long as you have that fortitude. The desire to make it work and also resilience. The ability to withstand those really difficult times.

Although winning streaks can be painful too for people. For example, you took a trade and it only made fifty pips and you watched it go another six hundred ninety without you. Those can be difficult too. So there’s a lot there but I think you are absolutely right. That idea of feeling like it is a downward spiral catastrophic thinking, that is a big for for sure.

Hugh: One exercise I found useful, I think I read it a book a long time ago but you kind of just quiet your mind. You sit there and you imagine yourself moving out of your body and looking at yourself sitting at a desk or whatever you are doing. You kind of evaluate yourself from a third party perspective and say, “Hey!” It is easier to evaluate somebody else than yourself. So when you kind of change your perspective I think that helps also.

Walter: That reminds me of what you just said, it reminds me kind of like an NLP thing I read about in 2003 or whatever. I started to use the exact thing which is, so it is kind of what you said. You imagine like let’s say, you are sitting at your trading station. So you imagine you are like the fly on the wall looking at you.

So from that perspective, what will the angle be from the height?  The way you do it is you view yourself from another’s perspective. It could be like from the top as if you are looking down from a drone or whatever. Looking down on your head, doing the right thing.

Doing everything right, executing as you should and that is in full color. The sound, everything is just as realistic as possible and then if you want to kill a habit what they said was you would look at it, you would see yourself making a mistake. Doing the thing that you want to get rid of from another perspective but it is in black and white. It is really kind of grainy and almost like an old movie or something.

So it is in black and white. It is not as vivid as the one when you envision what you want to happen. You watched that film and then you actually take that film, the black and white film of the recording that you are doing the wrong mistake. Throw it into the fire or blow it up with dynamite. Put it in front of the train tracks and let the train run over. Flush it down the toilet, that is  the way kind of like purging yourself out of that. Anyway that is a technique if people want to try it out. Let me know how it goes.

Hugh: Yeah, that works really well. I think I heard that from Anthony Robbins somewhere and he probably got it from NLP.

Walter: NLP, probably.

Hugh: Awesome. Thanks, Walter.

Walter: Alright, cool. See you!

Hugh: All the information in this podcast is for educational and informational purposes only and is not trading or investment advice.

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