Jack is stuck in a severe psychological slump. He has been making losing trades all week. He feels frustrated and he just doesn’t want to make another trade. He thinks, “Why bother trying again? I’ll just lose even more money. I want to give up.” Jack is developing a “psychological complex” about his trading. He is placing too much significance on the trades he is about to make. He is starting to make a big deal about trading events that should be routine. He is assuming that each trade has more meaning than it should; it is as if his self-esteem and identity are on the line with his money. It’s making him especially anxious and emotional.


He can no longer think logically, and his confidence is severely shaken. He can’t face trying to make it through another trading day. When one is in a severe psychological slump, it’s hard to trade efficiently. One is likely to make trading errors and intensify trading problems. Sometimes the psychological slump will go away after a few days of standing aside, resting, and allowing one to rejuvenate naturally. But there are other times when the slump just doesn’t go away. A trader’s confidence wavers, and fear, self-reproach, and hesitation colour one’s perceptions. At these times, it is vital to take proactive steps to break out of a debilitating psychological slump.

It is a mistake to underestimate the powerful influence of a profound psychological slump. When you are in such a slump, it may be difficult to break out of it. You may be vulnerable to disappointment to the extent that even the slightest setback can make you feel a sense of bleakness. If you passively hope that you’ll recover, it may be a long time before you regain your optimistic composure.

It’s wise to take an active, problem-solving approach. First, it is especially important to trade with a detailed trading plan. If you leave trading decisions up to your discretion while in a pessimistic mood, you’ll be more likely to make trading errors and make impulsive decisions. If every aspect of your trading plan is clearly specified, however, you can follow it even when your mood is a little off. But it must be clearly defined. You must know when to enter and when to exit. And most important, control your risk. If you know that it is relatively little you can lose on a given trade, or a series of trades, then you can more easily feel calm as you try to regain your optimism.

Once you have a well defined, viable, and realistic plan, you can then work on your attitude. When you’re in a psychological slump, it is important to acknowledge that you are especially vulnerable to setbacks and use positive self-talk to cultivate an optimistic mindset. Remind yourself that if you concentrate and just focus on trading your plan, you can more easily get through the trading day. But don’t get your hopes up too much. It is still quite possible that you won’t be successful at first.

You will need to make many trades in order to get the law of averages to work in your favour. If you can keep making well-planned trades, however, you should be able to trade profitably again. The key is to take active, realistic steps rather than passively hope that things will turn around on their own. The more you feel you are making a positive effort, the more likely your mood will turn around. You’ll feel empowered once again and the positive attitude will build until your confidence returns.

Trading is a challenging profession. All traders face a series of setbacks occasionally. There are also times when a series of setbacks can be so disheartening that it’s hard to recover naturally. But by taking active steps to change your mood, you can work to rebuild your optimistic mindset and return to profitability.

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