The Losing Streak - Lighten Up!
Trading full-time certainly has its ups and downs (pardon the pun). The hours can be great, the pay can be nice, and there is always a challenge if you are up to it. On the flip side, it can be a lonely profession, and there are the losing streaks to contend with. Our egos are often tied to our results, and it is in our best interests financially and emotionally to avoid losses when we can. The tough thing to accept is that losing is part of the game!
Every trader goes through times of success and struggle. Just as the market tends to have a rhythm with the way it moves, so can your results be as a trader. Sometimes, you will see things more clearly and anticipate moves correctly. Other times, it can feel as if the light at the end of the tunnel is still many miles away. Losing is an inevitable part of trading, as I mention in several places on my swing trading website. Ultimately, your success as a trader will be determined by how you are able to deal with losing.
I try my best to keep close tabs on my trading results. It is important to know where I stand, whether for the week, month, or year. This helps me stay aware of my equity curve, whether it is climbing, falling, or just moving sideways. When I trade well, I get more aggressive. When I am losing money and my win/loss ratio slips, I know rather quickly from my results that it is time to make a change.
Once I am faced with a losing streak, whether it is a few days in a row or a couple of weeks, I take a serious look at what needs to change first. Simple mathematics and my experience both tell me that decreasing my size while going through an account drawdown will minimize the severity of it. I typically cut my trading size in half to begin with, which gets me thinking less in terms of total dollars and more in terms of am I right or wrong with this trade. If a trade begins to work and gains momentum, I can always add to it and get more aggressive. However, if I find little follow-through or my trade reverses, I not only give back less open profit, but I am less prone to fall into “hope mode” as is common with positions which are too large for my own good.
The second change I make when my trading mojo disappears is that I take fewer total trades. I become much pickier as to which setups I am willing to trade. I get more disciplined with how the market needs to be acting in order for me to press buttons. Basically, I sit on my hands more. This also helps to curb losses when I am not trading my best, but it does more than that. I monitor my trading results closely, and by just getting more selective with the trades I do take, it helps to eliminate many varieties of trades which may be costing me. By simplifying my approach, I am able to find the light more easily.
Finally, remember that there are more important things in life than trading! Try to get out more often. Catch a movie. Work out. Play golf. Lighten up! This too shall pass!
So, the next time you find yourself in a trading funk, remember to trade smaller and less often. These surprisingly easy adjustments will not only help to soften the blow to your account, but they will help you find your way faster than a stubbornly aggressive approach.
Have a good night!
The Stock Bandit
thestockbandit@thestockbandit.com
http://www.thestockbandit.com/
Every trader goes through times of success and struggle. Just as the market tends to have a rhythm with the way it moves, so can your results be as a trader. Sometimes, you will see things more clearly and anticipate moves correctly. Other times, it can feel as if the light at the end of the tunnel is still many miles away. Losing is an inevitable part of trading, as I mention in several places on my swing trading website. Ultimately, your success as a trader will be determined by how you are able to deal with losing.
I try my best to keep close tabs on my trading results. It is important to know where I stand, whether for the week, month, or year. This helps me stay aware of my equity curve, whether it is climbing, falling, or just moving sideways. When I trade well, I get more aggressive. When I am losing money and my win/loss ratio slips, I know rather quickly from my results that it is time to make a change.
Once I am faced with a losing streak, whether it is a few days in a row or a couple of weeks, I take a serious look at what needs to change first. Simple mathematics and my experience both tell me that decreasing my size while going through an account drawdown will minimize the severity of it. I typically cut my trading size in half to begin with, which gets me thinking less in terms of total dollars and more in terms of am I right or wrong with this trade. If a trade begins to work and gains momentum, I can always add to it and get more aggressive. However, if I find little follow-through or my trade reverses, I not only give back less open profit, but I am less prone to fall into “hope mode” as is common with positions which are too large for my own good.
The second change I make when my trading mojo disappears is that I take fewer total trades. I become much pickier as to which setups I am willing to trade. I get more disciplined with how the market needs to be acting in order for me to press buttons. Basically, I sit on my hands more. This also helps to curb losses when I am not trading my best, but it does more than that. I monitor my trading results closely, and by just getting more selective with the trades I do take, it helps to eliminate many varieties of trades which may be costing me. By simplifying my approach, I am able to find the light more easily.
Finally, remember that there are more important things in life than trading! Try to get out more often. Catch a movie. Work out. Play golf. Lighten up! This too shall pass!
So, the next time you find yourself in a trading funk, remember to trade smaller and less often. These surprisingly easy adjustments will not only help to soften the blow to your account, but they will help you find your way faster than a stubbornly aggressive approach.
Have a good night!
The Stock Bandit
thestockbandit@thestockbandit.com
http://www.thestockbandit.com/
posted by The Stock Bandit at 3/08/2005 11:52:00 AM
14 Comments:
Hi SB -- thanks for the blogs, I love them. I have a few suggestions for possible upgrades for your site if you are interested: 1) have some kind of search fucntion so one can put in for example, TOL, and all the newsletters which featured TOL would come up. 2) to install some kind of message board so we could talk shop, exchange stock ideas, link up stock charts, etc. What do you think? Thanks for the great website and for the extra Friday letter -- made a point in WLP!
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Thank you for your comments, I always appreciate them. I am working to install a search feature for past picks, that is a good idea and I hope to have it completed before the weekend is out. There have just been a couple of snags with it today while I tested it. Not sure about the message board, but I will consider it and look into possibilities. I will occasionally send out the Thursday evening letters when I find quality setups to pass along. Thanks again!
The Stock Bandit
thestockbandit@thestockbandit.com
If I also may make a suggestion: I would love a line when applicable about sector strength -- so instead of what would appear to be random picks for example, if you write -- here is VLO since energy sector has been very strong -- or even better, in the introduction of the newsletter mention what sectors you believe are breaking out or showing strength. Homies, steel, energy for example were the leaders for several months now -- and by concentrating on them one could have had relatively easy trades (if there is anything easy in this business). When a sector is breaking out, for example in oil, then trades in that sector tend to be more forgiving than for example a pivot play in biotech which would have a higher failure rate if that sector was not strong at the time, no matter how pretty the chart. Rising tide at least lifts most boats. It would give a more serious tone for the professional trader following your service and I believe would improve an already great site. Thanks Mr. Stockbandit for all your efforts of constantly improving the service and taking into account your loyal customer's feedback.
Thank you for participating in the blog, I appreciate the comments! You bring up a valid point. While sectors don't typically move as quickly as stocks, and may change character more slowly, they are worth pointing out from time to time. I will do my best to mention them when I find noteable strength and weakness. Thanks again!
The Stock Bandit
thestockbandit@thestockbandit.com
SB: I downloaded the Excel search feature (the other option didn't work for me) and can't tell you how impressed I was with your previous picks -- you are right there with the leaders when a sector is breaking out (I saw you had NUE several times last year already). Rock on Mr. Stock Bandit.
You are nice to say that, thank you! The Excel spreadsheet may or may not show up depending on what version of Microsoft Office you may have. That is the only thing I have been able to determine, as it shows up from most of the PC's I tested but not all. Anyway, hope you like the spreadsheet feature even if you have to download it. Have a great week!
The Stock Bandit
thestockbandit@thestockbandit.com
Dear Dr. SB :-) I have a problem -- I just cannot seem to hold my winners -- I started trading at the beginning of the bear market and took some huge losses in 2001-2002 and I guess have been traumatized by them. As soon as I see green I sell. I also cut my losses quite quickly but all I seem to do in the end is to get my profits to pay for my losses, thus, just spinning my wheels. I now try to force myself to leave the room but even that doesn't work very well. Watching every tick drives me crazy -- any advice for this poor hapless trader? Thanks, PHT.
Hello PHP, your comments are of interest to us all!
I certainly am not immune to the same kinds of struggles you admit to. Holding onto winners is definitely the biggest thing I fight as a trader, personally.
I have always done well at cutting losers, they just are an eyesore to me on the trade blotter, and I rid myself of them quickly. So minimizing losses is my strength. About that weakness.....
Trading is about discipline! Discipline works on both sides of the fence....discipline to get OUT of bad trades is similar to the required discipline to STAY IN good trades.
The urge to sell at the sight of green is natural and human nature in my opinion. I fight this urge by taking partial sales. By getting out of winning trades in pieces, it allows me to satisfy that urge to sell into strength, but it also keeps me in the trade to participate in more profits.
Try making partial sales (2-3 exits instead of just 1) and see if that helps you. If watching every tick is not helping you, then use the Level II quotes for actually placing trades, and monitor your trades on a chart with a longer timeframe, such as 30-minute bars instead of 3-minute bars. This will help to keep you from looking under the microscope all day long and may relax you more and keep you in those winning trades longer.
Please let me know how it goes!
The Stock Bandit
TheStockBandit@TheStockBandit.com
Stock Bandit rules! AIRT yee hah! Thanks for that one.
Dear Mr. Stockbandit, I am one of your subscribers (I subscribed last year when you sent out this email saying -- Do you want to be in the beginning of something big.... or something like that) and that is exactly what it has become. Your site is fantastic and I think it will become more and more influential as time goes on. I am also v happy to have my low price locked in as I think this site will be over $100 a month in a year or two. Keep up the fantastic work, thanks v much for really taking feedback into account and always improving the site.
For your next post, how about an old fashioned pep talk? This market just has completely worn me out and it's just not fun anymore. I'm not losing any money, but not earning any either. Also, have you ever thought of changing the background color of the site from black to something easier on the eyes, like beige for ex?
I posted a pep talk for you, hope you find it helpful and not full of fluff! I have worked to change over most pages of the website to a white background where the text is, so that it would be easier on the eyes. Do you not find it helpful? I thought it would be much better than the old layout of light print on black background, but let me know what you think. Hard to please everyone but I like to try!
The Stock Bandit
Dear Mr. StockBandit, excellent post-- and yes, most important thing in tough markets like this is to tame down the trading, be less agressive and protect that cash reserve -- as you elegantly say. I hope your readers take the advice to heart. Market blows no doubt and one just has to be patient. Yes, I did notice the change it is just that the white text really stands against the black. I prefer a more beige color (like for ex the color on the side of this page as I post this comment-- so black text on beige background but hell I'm just finding a cause to complain because market is so boring! Thanks for all your work and the only other thing I would add is that if you could keep in the back of your (v intelligent) mind to have some 4 letter shorts as getting a short off in the NYSE when the stock is moving is not fun. Much prosperity, your faithful reader.
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