Let's be real, losing sucks. These markets lately have been wild, really wild and they can cause newer traders to lose, go on tilt and lose their cool.
In 2008/2009 I lost about $20,000 trading options when the markets blew up. I knew nothing (well not what I know today) and it almost ruined me. I was 22 and, at that age, that was a lot of money, hell it's a lot of money now. I almost allowed that slump to wipe me out, luckily a cooler head prevailed. Losing streaks will happen....to you to me....to great traders, it's just how it goes in this game. So, what's the solution? Here are 3 ideas that I use personally and preach to students....take them as you will...right or wrong just what has helped me.
1. Trade Smaller
One day you're hitting every trade as if you've seen this day already in advance and the next you're losing so fast you're not sure if you'll have to donate blood to fund another account.
Trade smaller. When you're losing the first thing to go is confidence. Like any great boxer will tell you, the mental game for them is key, it's why they have hype men and people prepping them pre-fight. It's the same for traders. When you lose your confidence due to losses it becomes a slippery slope.
What you want to do is salvage your losses because chances are you're not making them back that day...but...you can make them back by trading smaller. One thing I like to do is 1-2 lot trade options and widen the stops up. Priceline is a stock that is near and dear to me so I can trade a 1-2 lot and make some serious cash. This happened recently...(part of the reason for this post too) so I trade a 1 lot on PCLN and made $600 and change, that same day.
What does this do? This helps get your confidence back, you need this. You need to make small trades and stage a Robert Downey Jr. type of comeback. What this will also do is stop the P&L from bleeding....say you still can't hit a winner, well, at least, you're losing less and sometimes that's alright.
Nothing good in business comes from making decisions when you're emotional. Be it in trading or outside trading in another venture.
The markets are not going anywhere regardless of how many people hate capitalism. Trading slumps/losses suck and getting angry is easy to do, staying calm, cool and collected takes true discipline (as cheesy as this may sound).
Re composing yourself and ensuring that you have enough 'dry powder' to fire the next day is a must. Without any capital to put back to work you're out of the game. If you have some capital, however, you still have a fighting chance but it's on you to stay relaxed and remind yourself it's not over.
You will lose in trading, a lot, so get used to this idea and strive for progress not perfection with this. You'll also have great runs where you cant lose (these are great, enjoy them).
3. Take Profit
Like a good friend (and the person who encouraged me to teach) has always told me....'Nobody ever went broke from taking profits' - Thanks, Mike.
Normally I have a solid process for trading....a trade plan of sorts, that I rarely deviate from. That trade plan takes into account what I need to make every month trading based around a risk per trade/model that I put together for myself. Part of that model requires me using 'runner contracts' which is key in making more money trading. However, in a slump, that idea get's dumped quicker than one of Taylor Swift's boyfriends.
Take profits while in a slump....at least to start. Start repairing some of the losses and get that confidence back. The worse thing you can do in a slump is try to go 'all in' and make it back instantly. This never works, at least for me. It's much easier to cut your profit targets down, be it in half/quarter size...whatever works for your comfort level but take profits.
That slump will go away....sometimes slower than we would like, but handling yourself like a professional throughout it with a logical process is key in breaking it.
Hope this helps,
Founder, Landshark Analytics