A trading slump is just a way of saying that the trader is going through a drawdown.
It’s affecting the trader’s current trading, to the point where the trader is having trouble making a profit again.
So how do you climb out of this spiral?
This is a part of the trading game, and it requires you to handle a few different aspects of trading to climb back into the driver’s seat. But for most part, if your risk management was in place, then the psychological part is the main thing you need to take care of.
Get back to enjoying the game.
That’s what trading really is. Have you seen or heard anyone who hated trading but still made money from it?
All traders love this game.
Making money from it is another thing altogether, but the first step to making money is always to love the game.
Doesn’t matter if it’s because you love the buzz of financial news, the stories surrounding the stocks, the numbers game, the weighing of probability, the math, the bright lines and curious indicators, the freedom that it brings, the challenge, etc etc
Love the game for whatever aspect catches your fancy.
Then from there, you will find a way to make money from it.
Mediate to center your mood or emotions again
This is a great way to prepare yourself the trading day ahead, but it’s also how you can come back from a losing day.
A trading slump is no fun, so the point is to stabilize your mood.
The difference between feeling and mood, is generally duration.
Feelings tend to be very short and intense.
Moods are usually the ones that form your “norm” for a long period of time.
So it’s important to get yourself in the right mood.
Music is another way which can affect your mood.
A lot of traders listen to some form of music while trading as well, usually of the quieter variety so it doesn’t distract them, but keeps their mood pleasant.
Take a break
Refresh your perspectives.
Instead of fighting the market and winning or losing.
Think of trading as a constant search for agreement with the market.
Now, go think upon that for a moment.
Go have a good meal, spend time with your favourite people, watch a comedy.
Loosen up and forgive yourself.
Forgive the market.
Let it all go, the past is the past, you can only control the future.
Tomorrow, get back to the markets with a new objective. Find agreement with the markets.
Go back to your favourite setups, your bread and butter.
Trading is meant to be enjoyable.
Once you start getting your “feel” for the markets again, then size up gradually to your normal size.
There should be some profit buffer from the small trades to help you get back up to normal size.
Rumoured alternative solutions
#1 Tag on to the trades of another trader, just to “jump start” your engine.
I’m not an advocate of this method for a few reasons.
- You’ll be following the other trader’s methods and probably don’t understand why most of the signals are generated.
During a trading slump, your confidence could be low, which makes you susceptible to external influences that may not really help your trading.
- It doesn’t help you build confidence in YOU, your knowledge and skill.
- You will be totally reliant on someone else. That’s not what trading is about.
#2 Find a new way to approach the markets
I would not encourage this unless something has changed fundamentally in the market that has rendered your edge obsolete.
If you have experience with a strategy that was doing well before, but got into a bit of a slump, I would rather you take a look at your system again.
Determine why it’s in a drawdown now.
Is it due to changes in the market trends and volatility? Or is it your execution?
Tweak from there instead of abandoning the approach and jumping onto another ship.
If you’re a new trader on the other hand, it’s too early to be bothered by a trading slump.
Read widely, understand more about the markets and the information and tools available to you to trade.
Bear in mind, there is no holy grail system.
It’s all on you to make the tools you have, work in your favour.
Constantly check yourself to make sure you aren’t taking on too much risk.
Check that you’re abiding by the rules of whatever methodology you’re using.
Understand why those rules exist.
Track if those rules make sense and really contribute to your trading.
Think of ways to improve yourself.
There can be a whole other article on how to improve yourself as a new trader, so I’ll save that for another time.
So if you’re in a slump, don’t panic.
All successful traders have gone through a slump, the key to being successful, is to come back from a slump every single time.
Try some of the steps here and find your joy in the markets again.
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