Saturday, August 16, 2008

How to Handle a losing streak

Every trader has a losing streak now and then. It is a natural part of trading. The key is knowing what to do when you get into a losing streak.

If you are having a losing streak you should take that time to learn from your mistakes. There has to be a reason for having a large number of losses. It is important to try and figure out what that reason might be.

Try to look at how you are trading know and see what you are doing wrong. Are you getting stopped out too soon? Are you exiting your winners too early? Letting your losses get too big? Figure it out and adjust for it.

Another thing you can do is scale back. Try and make fewer trades and/or have them take up less of your account. Get stricter with your money management rules. It is not fun having a string of bad trades so you should keep your losses to a minimum.

Getting pickier can also help. Only take trades that have everything on your side, good fundamentals, good technicals, good industry group, ect. Maybe check to see if the planets align couldn’t hurt. It is better to take less risk in bad times and save the higher risk stuff for your winning streaks.

And last but not least don’t worry so much. Life is rich take a break. Go do something you enjoy and have fun. Try to forget about trading for a while. Spending all of your time worrying about what the stock market is doing can be very stressful.

Getting stressed out isn’t going to help but clearing your mind will. It is important to remember losing streaks shall pass. What is important is keeping a positive attitude and keeping your losses small, especially during bad times.

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