Trading demands rock-solid confidence. You’ll tend to see many more losing trades than winning trades. And when you hit upon a short losing streak, it is vital that you don’t get too bogged down. Consider the plight of Jim. He has made losing trade after losing trade. He has panicked and is starting to think negative, unproductive thoughts. “Why am I suddenly losing? What am I going to do? I don’t think I can get out of this.” A bad mood after a string of losers can work as a vicious cycle. You feel a little upset, start thinking things are worse than they really are. You get a little more upset, picture your situation as even worse, and so on and so on until your future looks bleak and hopeless. Before you get stuck in a rut, it is essential that you get your self out of it, and do it fast.
A series of unexpected losing trades can make almost anyone’s confidence waver, especially if it takes you by surprise. But there is a lot you can do to break the cycle of an ever-increasing sense of hopelessness. Just like having a specific trading plan, it is useful to have a plan for getting out of a bad mood. First, remember that your mood can often operate as a cycle, in which your memories of past failures can worsen your mood and that, in turn, can make you remember additional past failures, which in turn can worsen your mood.
You can break the cycle by remembering to take active steps to stop it. The second step to take is to actually intervene. Tell yourself positively, optimistic statements, such as, “This is just a minor setback. I can recover from it. It is no big deal.” Third, remember past successes. There are many times when you were in a slump and you came out of it quickly. It is useful to write these past triumphs on an index card. Take it out of your pocket after a set of losing trades and read it over. It will do wonders to restore your mood.
Don’t let a minor slump turn into a major one. It is easy to let an insignificant setback turn into a major incident unless you anticipate it and have a specific plan for recovering from it. By preparing for possible wavering confidence by having a plan for restoring your mood, you can trade in an optimal mood state. And in the long run, you’ll trade more profitably.