Dealing with losing periods

SlowlyButSurely

Well-known member
324 38
Hi,

How do many of you deal with the down days and reassure yourselves about your trading strategy and it's effectiveness?

I have been trading an FX strategy over the last two and a half months which took quite some time to develop. It has been going very well except for the last week and a half since non-farms where I can't seem to catch a break and my method is not performing to it's potential.

Do you ever take breaks from trading, waiting for the markets to start trending in more favorable patterns suited to your style? How do you reassure yourself that it is all part of the process and that you haven't completely forgotten how to trade suddenly? All advice and discussions of experiences welcome,

Cheers

SBS
 

Sonicscooter

Experienced member
1,811 351
Hi, simple, stop trading, the last thing an account needs is to bleed cash, then you have to work twice as hard to catch up the loss.

Check through your losing trades and try to discover why they lost, was it your strategy, or have you changed, ie become inpatient, not waiting for the right set up etc.

If you cannot find a specific reason for the change, paper trade and see if you can adapt your strategy or yourself to the new market conditions, avoid the temptation to trade out of boredom.

Regards Shane.
 
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SlowlyButSurely

Well-known member
324 38
Thanks for the messages, after Sonics message I took a day and a half off and just concentrated on other things. I went through my previous notes I had made and re-read through my whole strategy to see where I was going wrong as suggested.

At the end of the day I found that the errors were entirely down to me. I had become so confident in my system that I had become cocky and lazy. I was placing trades that looked good enough, without spending enough time doing proper analysis and waiting for all the boxes to be ticked. I was basically flipping a coin! I spent the rest of the afternoon just watching the market and waiting for the perfect setup to get involved and once again had a successful run of trading. In this case my biggest obstacle was myself.

Solas thanks for the link, but in the article it mentions getting slipped 1 pip on 100k EURUSD. That is ludicrous! With any good broker you should be able to get at least 2 million off without slippage on majors, especially EURUSD so if they are testing 50/50 with a 2.5 pip spread then no wonder it doesn't show a profit. Fortunately I don't rely on 50/50.
 

psaTrading

Experienced member
1,063 53
Very good blog!
Thanks for posting the link.
 

FXLord

Junior member
19 0
I trade for many years and have a big expirience in it and i can say, i never stop analyse and improve my strategies..
 

winner4x

Junior member
12 1
I trade using SNR n SND. Whenever i have losing periods like u, i stop trading for a while but didnt stop analysing the markets. I would draw the areas that i think te price would turn and see whether i'm right or wrong. That usually restores my confidence
 

Cornix

Well-known member
267 22
Two points:

1) Make sure you possess good historical stats for your strategy. Most important: realistically know what draw-downs and losing streaks may happen.

2) If your current losing period is within the parameters of normal draw-down, think longer-term horizon instead of focus on single trades/single series of trades. If losses exceed everything you ever expected from your strategy based on statistical research, something may be wrong. Stop. Take a small break. Then re-research your strategy and actual trading routine with cold head. Find the reasons of failure. Make proper conclusions.
 

Just_Mike

Newbie
5 0
Have a read of some poker blogs or forums, those guys would be better able to tell you how to mentally recovey after a losing run.

Just my opinion.
 

peakoil

Well-known member
257 38
Losing periods are firstly just part of the game. Anyone getting into this, needs to realise that, and mentally try to prepare for them. And, having to handle continuing losses, again and again, is also the reason why if you are regularly taking on the markets, using CFD's or spread-betting, you realistically just cannot rely on such for income alone - no matter how good you are: you do need a primary and unrelated income always, otherwise you're inviting too much pressure into your life - at the very least. IOW, never give up the day job just to try and concentrate solely on outsmarting the markets.

Net up this year yet, OTOH, the reality is also not making even one single trousered penny, spread betting, in neither the whole of March nor April! Experience helped that period not to be an unmanageable problem for this one. Because, without patience and something to fall back on, you too would likely be tearing your hair out with frustration, as you edge closer to ten weeks without a penny's banked profit to your name. Sometimes being right takes real time to come through with the goods. IOW, it's all very well being positioned correctly, and for the right reasons, if your timing is off, or your luck adrift...

Some say take time off if you're in a losing period, but if your methods, your plan and your reasoning to be in & stay in, are all sound, yet it's only your market timing which is off, I would then argue it's right to apply the brakes, just not to go as far, perhaps, as turning the engine off, at least just yet. There are so many times, when you simply need to hold off on the reins and just wait and wait and wait: easier, far easier said than done. And then there are the other times when only a stop loss can help. Again, experience and how you apply it to a given situation - separates those who will last, from those who won't; Which is also why there is a lot more to managing losses/risk exposure than simply knowing where to put your stop loss in!

Sometimes, when things are going really bad, you need to take a long walk, somewhere peaceful, and just forget it all. Or, if you're musically inclined, pick up your strings and start playing. It can be psychologically unhealthy to carry and obsessively focus upon the pressure of knowing you're carrying huge losses forward, with no sign of any hope on the horizon. Being 'couped up' in a room or (although a little better) talking to someone who doesn't know this game, won't help so much. Yet it's important not to internalise all the pressure, but instead to find a healthier outlet for it all. In an ideal world there'd be support groups all over the country, for persons who are trying to handle mounting losses. But the reality is - few feel sorry for anyone who tries to outsmart the markets, especially when there are far more pressing concerns in this world. Only fellow gamblers/participants truly know your pain, so consider seeking them out (if you can) and then, perhaps, it's fair to say, a pair shared could be a pain curtailed.
 
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NVP

Legendary member
37,535 1,988
if you have a rounded & solid strategy and understand your chosen market inside out.......... then losses can and will be handled with the objectivity required

knowledge and experience is power.......make sure you have them running at 100%

N
 

SlowlyButSurely

Well-known member
324 38
Thanks for all the information posted, not just for myself but for others learning to trade or with similar difficulties.

I took a week off and have come back to analyse what the problem was since by looking through my trading statements and looking on the charts. There were three problems that occurred:

1) I had such a history of success with my strategy that I became complacent. I started to take less care with my entries and just entered trades which I thought 'looked about right'. A terrible attitude to have in the markets!

2) I had recently started looking at other strategies, worried that I needed to learn more ways to trade in case my strategy stopped working. I'm not sure were this irrational fear has come from but it is probably fear of success. After 2 years of learning and 6 months of working on this strategy, 8 hours a day 5 days per week, it is finally coming together. I think that the fear of it just being 'luck' was weighing on me. I was implementing these new strategies without rigorously testing them, I just simply added them to my existing plan...a recipe for disaster which probably eroded my edge!

3) Not appreciating probability enough. I have had runs of 6 winners in a row before, trading live. That was fantastic, however as soon as I had three or four losers in a row, something was wrong with the system in my mind. From there I started to unravel and lost confidence in the system. A rookie error!


On reflection it is easy to see my mistakes and how to address them, so taking time out was definitely needed! I will focus on correcting my errors in the following ways:

1) Never disrespect the markets and become complacent; always take care of when selecting positions and treat every trade as though it is all or nothing when arranging the entry. If it isn't perfect, skip it!

2) Stick to what you know, and if it isn't broke then don't fix it. I will be sticking 100% to my trading strategy from here on out, only looking to improve on my entries and exits above all else.

3) Remember this is a game of odds and probabilities. After 4 successful months on demo and 2 successful months live I should have had faith in my system. If it is proven to work over the long run then stick with it. If you cannot take the pressure, take a break!


Anyway, just a little essay which will provide insight to others and it also helps me get it written and set in stone so I can reinforce these errors and solutions to myself. I'm going to spend the remainder of May trading back on the demo until I restore my confidence as I have reached my monthly loss limit.

Cheers,

SBS
 
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Chris_Nomadic

Junior member
12 0
Always take a step back and look at the bigger picture. If you lose your confidence get out of the markets and reevaluate your strategy but at the same time dont lose your confidence if youve been performing well for a couple months and suddenly go on a week long losing streak.
 

SlowlyButSurely

Well-known member
324 38
I'm the kind who are really demotivated during my downtime, particularly after a series of losses. Most of the time i try to come back and "take back" from the market. Thats how i blew some of my main accounts. Reading this thread, posts from u guys really help me out in dealing with my emotions. Thanks guys

Happens to most traders when starting out I think. I've thrown away plenty of trades/money trying to chase the markets thinking 'F*ck this I know I'm right, it has to continue' or 'This looks like a level too, let's jump in now' etc etc.

The funniest (saddest?) part is that often the market will do what you thought later on and then you beat yourself up even more. A lot of people say that the most important thing they learned before becoming profitable was knowing how to sit and wait or walk away after a few losses.
 
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