Your Forex trading system might be the best in the world. (At least, it should be the best in the word for you!)
However as the market is unpredictable, you will always have losses and even series of them.
And, as strong minded as you are, overcoming these bad trading days can sometimes be very, very, very difficult…
Here are my 3 best tips to overcome a bad trading day:
1. Crush some numbers
Really? Do you want to make my day even worst?
Let me explain…
Apart from the impact on your mood, the other danger of successive losses is that you might start losing confidence in your system.
One of the best way to avoid this is to calculate the probability of having a series of “x” losing trades, “x” being the amount of consecutive losses you have just experienced.
How to calculate this probability?
1) Calculate the probability of having a losing trade: Divide the total amount of losses you had since you started working with your system by the total amount of trades you took.
For example, if so far you have had a total of 235 losses for 567 trades, your probability of having a losing trade is equal to 235/567 = 0,4144 = 41,44%
2) Multiply that number by itself, the amount of losses you just experienced.
So, let’s say you just had 7 losses in a row:
0,4144 * 0,4144 * 0,4144 * 0,4144 * 0,4144 * 0,4144 * 0,4144 = 0,0021 = 2%
Which means your system actually has a 2% probability to experience 7 losses in a row.
Fair enough you haven’t been lucky…
BUT these 7 losses in a row have a probability to occur 2 times per every 100 trades!
Actually doing the math and seeing the results is a great relief. It reminds you that you are experimenting nothing less than a statistically significant series of losses.
And helps you keep faith in your system. It really does remove the “feeling” (you know feelings have no place in trading) of a system’s default.
2. Take a break
Now that you’ve convinced yourself this is nothing more than a normal series of losses, just take a break.
Yeah, that’s right. Switch off the computer and do something else!
This series of losses has had an impact on your mood. You therefore need to take some time to get rid of these feelings.
When this happens to me I usually take a 24 hours break from the markets. Sometimes even more.
There simply is no point trading when you’re not in the right mood.
3. Reflect on the experience
Once your emotions have drifted away, one of the best thing you can do for your future performances is to reflect on the experience:
-How did you feel when you had this series of losses?
-How do you think these feelings have influenced your trading?
– What do you think you should have done to take the last few trades like any other one?
-What are you going to add to your system in order to help prevent another bad trading day? (Ex.: stop trading for a day after 2 losses in a row; take a 2 hours break after each loss, …)
-What did you learn about yourself during the series of losses and how this can help you become a better trader?
Taking the time to reflect will really help you grow as a Forex trader…