We’ve all been there. Trade 1 stops out, trade 2 stops out and maybe even trade 3 stops out. Not exactly the way you had envisioned the day going before the market opened. But the truth is, down days are part of the business. Don’t ever let someone tell you they ‘never’ lose or ‘never’ have a down day. If they even remotely suggest such a thing, run away, and run fast! The point here is that eventually you will have to deal with not only losing trades, but losing days and maybe even a losing week from time to time. Though we do our very best to avoid them, they will happen, so what should we actually do when we have a bad day?
First and foremost your down trading days should never be ‘huge.’ Newer traders should not be risking more than $10-$20 per trade, and even experienced traders need to go slowly and truly earn the right to raise their risk level, because money/account management keeps you solvent. If, however, you do have a bad day, the best thing to do is walk away and go have some fun. Do something that is completely and totally unrelated to trading. This will help to relieve the negative emotions you are feeling and by doing something fun, it will help clear your head for when you need to come back and face the music. Although going out and forgetting about trading for a few hours is a very productive exercise, you have to also understand that there is still real work that needs to be done.
After clearing your head and recharging your batteries, it’s now time to face the bad day head on. While no one wants to relive a negative experience, it’s also the only way you will grow as a trader. This is not something that can be swept under the rug, because if you don’t address the root cause of the problem it will likely re-occur. As tough as it is, the most crucial part about reviewing your trades is being objective. It’s very easy to make excuses, but the only way to improve is to plainly and bluntly acknowledge what really happened, unvarnished.
As you’ve probably heard, the emotional side of trading is everything. So make sure that going forward you keep a trading journal, where you write down your emotional state of mind after each day. You also need to keep a trade tracking spreadsheet so you can understand the empirical data as well. Example: Time of day, long vs. short, high priced stocks vs. low priced stocks, actual results vs. trading plan results, and more. These are all very important things to track so that you will have a far clearer picture of your strengths and weaknesses. By using both a trading journal and a tracking spreadsheet you will be able to get the raw empirical data as well as your emotional state of mind during the trading day. Once you’ve put both of these together then you can begin to make meaningful adjustments that will help minimize your weaknesses, while maximizing your strengths.
No matter how bad the day was, you need to face the music and learn from it. In doing so, you will eventually learn who is ‘really’ trading, not who you ‘think’ is trading. Ultimately to be a successful trader you have to acknowledge and accept who you really are. One of the biggest problems we find with struggling traders is their inability to acknowledge their deficiencies. We all have them, so don’t think you’re alone. Denial about a negative emotional trait can be extremely harmful to your trading career. The only way to succeed in this business is to truly and objectively understand who is REALLY trading, not who you THINK is trading. For example, if you are a jittery, or impatient person, then you need to develop a trading plan that allows you to trade successfully within that emotional state of mind. Don’t try to change your core beliefs, rather, try to trade within them so that it will feel more comfortable. If you are jittery, then shoot for smaller targets with a higher accuracy. If you are patient, then hold for the bigger moves, perhaps with a slightly lower accuracy. Either way, the mind is a powerful tool, so don’t try to fight it all the time, go with the flow and find a trading style that compliments your personality. The problem is that many traders can’t accept who they are and naively think they will magically change. It simply doesn’t happen that way. In fact, if most traders worked for a ‘regular’ company, they would be fired in less than a month, because they don’t listen to the rules and when you break the rules often enough you get fired. One of
the reasons they break the rules is because they have the WRONG rules to begin with. You need to reconcile with who is really trading and then find a way for ‘that’ person to make money. We talk a great deal about this topic in
our 460 page, 2 day, Professional Trading Strategies course which is easily the best course on trading in the industry.
Losing days are unavoidable. Thus, we must do our best to learn as much as possible from them so we don’t repeat the same mistakes, and so we can minimize the impact of losing days. We encourage students to learn and make their own decisions because our goal is to develop self-directed traders. However, there will be times when you need to step up and acknowledge the need to seek help. Traders in denial are simply failed traders in waiting. Don’t be that person. If you are genuinely trying to correct mistakes and improve upon your trading results it’s only a matter of time before things improve. If for some reason things don’t improve, then you need to seek help from a professional…like Live Traders. Remember, losing days are OK, but only if you learn from them. At Live Traders we develop self-directed traders who are willing to accept the responsibility for their own actions, which is very important in this business, as there are too many ‘victim mentality’ type people out there. Trading is the greatest meritocracy there is, and we like it that way because it rewards hard work and persistence.
There is a lot of time and effort that goes into becoming a successful day-trader; and you would be smart to do your homework before hanging your hat somewhere. It’s wise to talk to experienced traders about their journey and of course, do your own due diligence to get a better feel for where you would likely be most comfortable. I have been doing this for 12 years and I still learn something new every day. The people who apply the knowledge and experience they acquire are usually the ones that are the most successful, so never get ahead of yourself and never let your ego trade for you, the market is all knowing and has a very uncanny way of teaching us lessons, especially when we least expect it. The market doesn’t care how big your account is, what your experience level is, education level, intelligence level or anything else, that means it’s ‘generally’ fair for all participants (yes I know HFT’s and large banks don’t play by the same rules). There are no excuses in this business, it really only comes down to how badly you want to succeed, because there are no office politics or other issues to keep you from advancing, other than your own merit. On top of that, it provides as much or more freedom than just about any other career out there. Trading is a truly wonderful business. Best of luck in your journey as a trader, it is genuinely one of the most enjoyable and flexible careers out there, IF you are willing to put in the time and effort to master it. It won’t come easy, but it’ll be worth it!