Module 12   Innerworth — Mind over marketsChapter 464

Rebuilding Momentum

It’s inevitable. There’s a point where even a seasoned, master trader faces a losing streak. The difference between a seasoned trader and a novice, however, is that master traders know how to get out of the rut more quickly. They take decisive action and rebuild momentum. A drawdown can be a lot like digging yourself into a hole, but the difference between the novice and the master is that the master trader gets out early while the novice keeps digging the hole deeper and deeper until it is almost impossible to climb out. It’s vital that you learn to identify warning signs, and get out before the damage is difficult to repair.


Seasoned traders more quickly recognize the start of a losing streak, and more importantly, they aren’t afraid to face their limitations and bring the downturn to a halt before matters get even worse. If you’re a novice trader trying to bring a downturn to a halt, it’s wise to follow a few simple guidelines: Don’t be afraid to admit that you’re in a losing streak. Stay calm, even when events look dire. Take an honest look at what you’re doing, and make changes before it’s too late.

Traders in the middle of a losing streak are often the last to know that they are in trouble. This usually happens because many traders fail to closely monitor their progress. Seasoned traders, in contrast, continually monitor their win-loss ratio or a similar indicator of performance. When their performance indicators seem awry, they start to examine their trading methods and decisions more carefully. They try to identify what they are doing right and what they are doing wrong in order to determine how they can fine-tune their approach and return to profitability.

Many times, when traders start to feel that they are in a downturn, they panic. They suddenly become emotionally volatile. Even minor hassles bother them.  They are easily frustrated. At high-stress levels, it’s difficult to spot high probability setups or execute trading plans effortlessly. But more experienced traders recognize that their emotions have risen to dangerous levels, and take appropriate measures. They may reduce their position size, for example, until the stressful emotions subside and they can once again trade more calmly.

Finally, master traders aren’t afraid to look closely at their trading methods and make necessary changes. But novice traders tend to avoid taking a good, hard look at their methods. Instead, they falsely hope that somehow the odds will work in their favour and that a run of good luck will turn things around. Master traders, however, immediately start looking to break out of the losing streak.

They look closely at their methods and trade smaller or stand aside temporarily until they determine how they can get back on track and return to profitability. Enduring success is a matter of staying profitable while the markets are continually changing. Sometimes market conditions aren’t conducive to profits. Sometimes your psychological edge is temporarily blunted, but by looking closely at your methods, and making necessary changes, you’ll be able to minimize the potential harm and rebuild momentum.

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