Alton Hill is a Cofounder at TradingSim. He has a passion to help people and found that one of his ways of doing so, is through the world of Day Trading. Alton’s skillset is in Product Development and Design Thinking which he uses to write and improve the overall experience for TradingSim.
Losing Streaks in Stock Trading
Losing streaks are a part of any trading system and must be mastered by the day trader in order to trade in the zone. Any veteran trader has been through a slump. Trading slumps are the same bad streaks that any sports player may go through during their career. The key to dealing with a losing streak is to first identify when you are on a streak and two coming out of a losing mentality.
How to Identify a Losing Streak
In order to determine you are on a losing streak, you must first have a method for tracking a day trading system. The best method for doing this is to create a day trading journal. There are two keys to identifying a losing streak. First you must have a minimum threshold for profitability for your day trading system. Next, you must determine how long your system can underperform this level before a red flag is raised. Once your trading activity breaks this threshold, its time to put on the breaks. Day traders have to maintain enormous discipline on a daily basis because a losing streak can prove disastrous due to the frequency of trading activity.
Overcoming Your Longest Losing Streak
Pulling yourself out of a losing streak is one of the hardest challenges for day traders. Below are some simple steps you can take to speed up the process.
Smaller Sizes: Cut your trading size in half in order to limit losses and to regain your confidence.
Positive Thinking: Begin to focus on positive thoughts and be sure to maintain a winning attitude.
Do not change your system: When you backtested your system it worked just fine. So, do not change anything with the system, it will only confuse you more and restart the clock on building the experience required to become a master day trader.
Set a Daily Maximum Drawdown: No exactly how much you are willing to lose per day. Do not let your losses go beyond this level.
Limit the Number of Trades Per Day: By trading less, it will require you to focus and only select the best setups, thus increasing profitability.