7 Step Cure for a Trading Losing Streak

Every trader has losing streaks from time to time. It’s just part of the “game” of trading. But if you’ve been losing for a long time or if your losses are threatening to wipe out your trading account, it’s time to rethink your trading strategy and take some responsibility for your poor performance on the market.

Even though there is no one “cure” for all trading mistakes that will make you money on the market right away, there are some steps you can take that will point you in the right direction. If you follow the 7 steps I’ve listed below, you’ll be able to stop a long losing streak in trading and get back on track to making money much faster.

Admit that you’re (a big) part of the problem.

As I’ve said in other articles, the way we’re built makes us bad traders from the beginning. We are born and raised with emotions like greed, fear, hope, and regret, and as traders, all of these things work against us. So, the first thing you need to do is realize that you’re probably most of the reason why you’re losing. Once you accept this, you can start to figure out how to stop losing. Basically, if we want to be successful traders, we have to get over ourselves and our own flaws, which isn’t easy for most people to do. This is the main reason why trading is so hard and so many people fail at it.

So, if we can realize and accept that we are all basically biologically set up to fail at trading, we can turn that realization into a problem that we can solve with our brains. We can learn to “get over” ourselves if we use good planning, logic, and common sense. This will help us deal with other problems in the market.

Stop trading in real-time for a while.

If you want to stop losing money in trading, the next thing to do is to stop trading live for a while. I know it seems like a no-brainer, but you’d be surprised at how many people keep trading even though they’re losing almost every trade until they run out of money.

This step can be the hardest, maybe even more than any of the others. By stopping trading live for a while and taking a big step back, you are basically admitting that you have been out of control and hurting yourself. But you won’t be able to figure out what you’ve been doing wrong until you get away from the market and, more specifically, the emotions of having real money on the line. To end a losing streak and get your trading “ship” going in the right direction again, you need to keep your head and be objective. If you have to go back to trading on a demo account for a while, you have to do that. Accept the truth and deal with it, or you’ll never move on and find long-term success in trading.

Trade like you’re “bored”

If you’re not bored when you trade, you’re probably not doing it right. You shouldn’t feel like trading is like going to a theme park or casino. Instead, if you’re doing it right, it should be a pretty boring, but still interesting, thing to do.

Most of the time, a trader’s extreme emotional highs and lows are caused by bad trading habits or behavior in the market. Yes, of course, you’ll get really excited when you win and really mad when you lose if you bet too much for the size of your bankroll. But if you want to make trading your job, why in the world would you trade in this way? If you do this, you’ll have a string of bad trades and eventually run out of money.

You need to boil trading down to its most important parts, which are strategy, planning, and acting logically instead of on a whim. If you do this, most of the time you will be “bored” when you look at the market and trade because you will know what to expect. That doesn’t mean you’ll know whether you’ll win or lose on any given trade. It just means you’ve planned for a possible loss or win, so neither should come as a surprise. Also, since you should be managing your risk well and not overtrading, neither a win nor a loss should be very exciting because you already know and have accepted how much you will win or lose on any given trade.

Be more consistent with how you trade.

If you’ve been losing a lot lately, it’s probably safe to say that you’re not being consistent with how you trade. This ties in with the third point about being “bored” while trading. Basically, you should have settled into a trading routine that doesn’t change too much from week to week.

Each week, you should analyze the major markets you trade, look for and mark any key chart levels, find the trend or market bias, and then scan the charts each day for possible price action trading opportunities. If there’s nothing there, leave until the next time you’re supposed to look at the market. Having a trading routine like this will help you avoid making trades on the spur of the moment and keep you much more objective and clear-headed as you look at the market.

Know your own “pain” threshold for risk

How much money can you afford to lose on any given trade? How much money can you put on the market and still be able to sleep well at night? Have you ever asked yourself any of these questions and given honest answers? If you don’t, it’s a big reason why you might be losing a lot.

A trader’s success depends more on how well they handle risks than on almost anything else. Most traders find risk management boring at first, so they don’t pay much attention to it. But ignoring it will always get you in the end. I’ve said in many other lessons that you need to know how to handle risks well before you can be a good trader.

Managing your risk is the first step to controlling your emotions when you trade and developing the right trading mindset. If you make your trades so risky that you can’t stop looking at the screen and can’t sleep at night, you’ll lose all your money very quickly.

Don’t “peak” on low-time-frame charts

You don’t have to be worried about finding “every trade.” If you do this, you’ll definitely drive yourself crazy while also emptying your trading account. Traders think that if they look at low time frames like the 5-minute and 15-minute charts, they will be able to find more trading opportunities and make more money in the market. This is an illusion, though, because all you’re doing when you look at these short time frames is making it more likely that you’ll make a trade with a low chance of success and lose the money you wouldn’t have lost otherwise.

Think about your trading plan

Lastly, if you’re using the wrong trading strategy (or system), it could be causing you to lose money on the market or even wipe out your entire account.

A trading strategy should be easy to understand and work well. You shouldn’t have to figure out ten different indicators, read economic news, and watch financial news on TV to know if there’s a good trade on the market. You might be losing money because you are looking at too many factors or because your trading method is too complicated.

How you think about the market and how you get into it should be pretty simple and clear. Partly because of this, I use the strength and simplicity of price action strategies when I trade. Be honest with yourself. Now is the time to take a good, hard look at what you’re doing if you don’t really know what your trading strategy is or if you’re not sure why and how you’re entering trades.

“If you don't find a way to make money while you sleep, you will work until you die.”

- Warren Buffett


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