This is a part 3 on slumps. Please feel free to download and share the PDF. TraderHabitsSlumps2
Tip #8- Take a Break
Tip #9- Relax
Tip # 10- Acquire a Selective Memory
Tip #11- Bring it All Together
Take a Break
“Being able to trade again, may require not trading tomorrow.”
Probably the best advice that I ever received I call Rule #1. Rule #1 BE ABLE TO TRADE TOMORROW. It seems simple and it is. Like I said before, each day is an audition for the next. Hopefully, you know something more about yourself; the market and the relationship between the two then you did the previous day. I am not saying that tomorrow is more important than today, if you do not take care of today there will be no tomorrow. When I am in a slump or not I take as many breaks as possible, between trades and between trading days.
Being able to trade tomorrow often means not trading the next day or the next week. One way to stop or slow down a slump is to not trade. It is not usually a technique that fails for an extended period of time but your interpretation of it. By taking a break it is easier to see where your interpretations went wrong. We get too close to be able to see anything clearly. If you find that you are struggling, ask yourself from what perspective am I looking? Are you looking at the problem from the window of an airplane on the runway or from that same window while the plane is in flight? If the view from the runway is not effective try the view from afar.
Taking a break is easier said than done; to some extent trading is an addiction. There is a rush of adrenaline that happens with each trade I do not care if it is your millionth trade or a paper trade. But less is more in trading, the less you trade the more money you will have. The longer I take between trades the better I do, it forces me to take a mental inventory and a market inventory. Of course you may miss a trade but who cares. Would you rather be watching a trade you wished you were in or in a trade you wished you were watching? The answer is clear to me.
Taking a break on certain days, times of year, and times of day is common practice for every professional trader. If you are unaware of those times then just check out your trading journal. I know a lot of traders that take rollover, end of month, earning seasons, FED announcements and lunch times off. It is not always because the market trades a little different those days but they are not successful on those days. It is something mental for them but they are aware of it and use that time to take care of any other loose ends. I promise that the market will be there when you get back. Not making money is not losing and I think that is a hard concept to believe in. I know a trader who takes every earnings season off, he told me that if he had done it earlier he would be more profitable. Let me repeat, not trading and not making money, is not losing.
When I am in a slump or to prevent a slump I take time off and time between trades. It is human nature to remember the profits that you had an opportunity to make and forgot the losses you were taking. See it for what it is and it will become an asset. Take a break and be able to trade tomorrow, there will be more opportunities later. Being able to trade tomorrow means looking through the window while in flight, if that takes an hour or a week to do it.
“If you treat every situation as a life and death matter, you’ll die a lot of times. “
I view trading as a performance. It is a series of reactions based on the market actions. It is a reaction depending on your experience, beliefs, and ability. Your reactions will be better the more relaxed you are. Not being relaxed may not affect the current trade or even the trades for that day but it will eventually. Stress will contribute to a slump and prevent you from pulling out of one.
I outlined things such as having confidence and creating a routine to help you relax but those are things that work for me and you have to figure out what works best for you. Another technique I use to combat stress is imagining myself in a stress less situation. This is embarrassing but while in a trade or looking at a trade I imagine myself floating in water. It helps me to relax and creates an environment for me to reach my maximum potential.
Another way I reduce my stress is by re-programming the connotations of the words loss and risk. Risk to me means in the worst case scenario I lose this much. It does not mean that I have no control of what happens to the trade. I do not have any control of what the market does but I can control how I react to the market. When I enter a trade I do not expect to lose but I am aware it is a possibility and I have already accepted it. At any given price there is a 50% chance of winning and 50% chance of losing. I try to position myself so I have at least a 51% chance of winning. I view loss much like I view taxes. I do not enjoy it but I know if I do not pay it I probably have not made money. If you cannot take rejection or loss, trading is not for you. Not that you will lose money but you are probably not making enough to justify you spending the time to trade. Loss is a necessity in trading; it means that you had an opportunity to make money. There is no doubt that I could make money every day if I wanted to, but it would not be very much. In order for your money to work for you it has to be at work.
It is rare to trade completely without stress. If you do not take steps to be aware of your stress or reduce it, it will eventually manifest itself. I have given you some of the tricks that I use to reduce my stress. It is important that you take these tips and make them your own to receive maximum benefit. Not handling stress will affect your performance and leave you susceptible to slumps.
Acquire a Selective Memory
“Don’t be discouraged by a failure. It can be a positive experience. Failure is, in a sense, the highway to success, inasmuch as every discovery of what is false leads us to seek earnestly after what is true, and every fresh experience points out some form of error which we shall afterwards carefully avoid.”
As a former athlete I know all about having selective memory. If I had a bad play, I had to examine it and move on. If I was not fully into the next play I would get embarrassed again. Much like there was an offensive player trying to do his best against me so are other traders that have more money, more experience, and better technology. They are going to win from time to time and you are going to have to move on and use it to your advantage. Anyone who has watched football has seen a receiver drop an easy pass and then the next play jump off sides. The receiver did not move on and it caused something else negative. Mistakes breed mistakes, do not be a breeder. A slump has a potential to accelerate if you let one misfortune or mistake become two or three or 10.
During the course of a trading day what are perceived as bad things will happen. To be able to take advantage of them you have to be mostly focused on the present. Do you think the sellers that you just bought from to be long are worried about what just happened to you? You put yourself at a disadvantage if you are not focused on the current trade and situation.
Having selective memory is essential to any trader. The first step is to process what the market is telling you, next you must make any necessary adjustments, and lastly you must move on. By doing this you will not only cut down on any back to back losses but it is sure to keep you out of a slump.
Bringing it All Together
“That is what learning is. You suddenly understand something you’ve understood all your life, but in a new way.”
Trading is challenging and there are going to be times when it seems harder than it really is. A slump is bound to happen to any active trader and when it does embrace it. The market is trying to tell you something, are you ready to listen? Your ability to recognize you are in a slump, how and why you got into the slump, and identifying the most efficient way to get out of a slump will determine the magnitude of your slump. A slump does not necessarily mean you are losing money it simple means that you are not trading to your maximum ability. It is important to look at your trading daily, as soon as you feel as though you are not maximizing your potential it is time to take action. If you wait till your account is drained it is too late. Take notes daily to monitor your progress. I recommend you monitor your progress in terms of money but also in a different way. I use the system that another trader gave me and made it my own, you should do the same.
Slumps are a part of trading, the sooner you can master them the more profitable you will be in the long run. A slump is likely to occur if you get away from the basics too early. Your basic techniques and beliefs are there to support you in the lean times. Stay positive at all times, having net negative thoughts will only hurt you. Creating a routine helps relax and focus conscious and subconscious thoughts away from an outcome which tend to be negative. The routine must be effortless or it defeats the purpose. Asking for help or talking with another trader is not a sign of weakness but a key to prevent a trading account disaster. I cannot stress enough how important it is to regain confidence after not performing your best. Start small and it will come back to you, it is like riding a bike. Take a lot notes, do not rely on your memory. It is usually your head that is getting in the way of reaching maximum potential so it is not the most reliable source to refer back to. Take a break both during the day and throughout the year. You will find that you come back refreshed and with a clear mind. Stress will creep in if you let it and you will be uncomfortable whether you notice it or not. It will come through in your trading. Having a selective memory is important in trading because of the high failure rate. Take the feedback the market is giving you and move on. Mistakes breed mistakes don’t be a breeder.
“Well done is better than well said.”
No two traders will view trading the same. In order for you to get the most out of this book you have to take what I have written and make it your own. Take action with the knowledge you have been given. The techniques and thoughts that I use have helped me when my back has been against the wall. It took me failing multiple times to develop, it was worth it. I thank you for taking the time to read this, I really do appreciate it. If you have any questions, comments, concerns, or have anything to add please do so by email firstname.lastname@example.org. I wrote this to help myself be clearer with my beliefs and to understand my actions. I hope thiscreates a dialogue both within yourself and with me. I am always trying to see things from a different perspective so I appreciate your feedback and I am certain it will be beneficial to both of us. Have a great day and make good things happen.
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