How To Bounce Back After a Big Trading Loss After trading for 10+...
Justin Banks@RealJGBanks
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Mar 31, 2024
~6 min read
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How To Bounce Back After a Big Trading Loss
After trading for 10+ years I have experienced $1,000’s and $1,000’s of losses
Here is how to bounce back after losses and blown accounts
RT and LIKE 🧵👇 $SPY $SPX $QQQ
After trading for 10+ years I have experienced $1,000’s and $1,000’s of losses
Here is how to bounce back after losses and blown accounts
RT and LIKE 🧵👇 $SPY $SPX $QQQ
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A lapse in discipline, or just a sustained bleed-out of trading capital, nearly every trader will face a big loss in their career. How to bounce back after a big loss isn't complex.
What is difficult is repairing the mental damage done, especially the damage to
confidence.
What is difficult is repairing the mental damage done, especially the damage to
confidence.
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The level of confidence, where you see the market for what it is, step in whenever there's an opportunity, cut your losses when it doesn't turn out, and sit on your hands when conditions aren't right, is the confidence that can be lost after a losing streak.
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You may begin to question yourself, which leads
to all the typical problems, like getting out of trades too quickly, holding on to them too long, skipping trades with the fear of losing, or getting into more trades than you should in an attempt to get some winning trades.
to all the typical problems, like getting out of trades too quickly, holding on to them too long, skipping trades with the fear of losing, or getting into more trades than you should in an attempt to get some winning trades.
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The Day of Your Loss
Every trader has bad days. As a rule, never let a bad day cost you more than you make on an average profitable day.
If you average $700 on your winning days, don't lose much more than that on a bad day. Control the downside.
Every trader has bad days. As a rule, never let a bad day cost you more than you make on an average profitable day.
If you average $700 on your winning days, don't lose much more than that on a bad day. Control the downside.
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A big loss causes all sorts of inner conflict- revenge, fear, anger, frustration, self-hate, the list goes on. After a big loss, there's no way to trade with a clear head. 250 trading days in a year, there is no rush to get back in there; today is not the day to make it all back.
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Accept Responsibility
Maybe it was just a bad few days, maybe it was your biggest single loss ever, or maybe it's a life-altering loss. In the case of facing financial ruin, there isn't much to do. Don't trade until the issue is resolved.
Maybe it was just a bad few days, maybe it was your biggest single loss ever, or maybe it's a life-altering loss. In the case of facing financial ruin, there isn't much to do. Don't trade until the issue is resolved.
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Once it is, then you can proceed to
the steps below, but not before.
Don't trade with a massive debt over your head
with intentions of using, it to abolish that debt; that's a lot of pressure and could lead to a worse predicament.
the steps below, but not before.
Don't trade with a massive debt over your head
with intentions of using, it to abolish that debt; that's a lot of pressure and could lead to a worse predicament.
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If you have drawn down your account, had a losing streak, or suffered a big sudden loss, that's different. You're still in the game.
Doesn't matter if a surprise news caused the price to go past your SL, or a tech meltdown caused connection lost, and the market moved against you.
Doesn't matter if a surprise news caused the price to go past your SL, or a tech meltdown caused connection lost, and the market moved against you.
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There is always an excuse for a losing trade. Some are actually good excuses,
but as traders, we ultimately must accept all the risks. Until we accept that we are
responsible for whatever happens with our orders, history will likely repeat, and
the same thing will happen again.
but as traders, we ultimately must accept all the risks. Until we accept that we are
responsible for whatever happens with our orders, history will likely repeat, and
the same thing will happen again.
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Accept responsibility and figure out what could have been done differently. That will help reduce the chance of it occurring again. It is also healthier than bottling up hostility and blaming others for your misfortunes.
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Blaming others is admitting that you don't control your own trading, and if that is the case, why are you
trading?
If you control your trading, then you can fix it; if others control your trading, you can't fix anything.
trading?
If you control your trading, then you can fix it; if others control your trading, you can't fix anything.
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There is always something that can be done. It may involve changing markets, having backup data connections, or having stop-losses and targets automatically sent out when a trade is entered, or maybe you set up your platform to liquidate
your trades if you hit a daily SL limit.
your trades if you hit a daily SL limit.
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Most likely it's because you aren't sticking to your rules and are sizing too big. The solution is there; you just need to find it. The best way to find it is to admit that the loss resulted from not handling something well, and then taking steps to fix it..
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Fixing the particular issue that caused the loss is step one. There's still the issue of confidence, though. Even with the issue fixed, your confidence may be low
after taking a big hit.
after taking a big hit.
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Realign Your Focus
When you started, you were likely overconfident, but then the market put you in your place.
You developed healthy confidence over time by building your trading system, testing and practicing it, and then ultimately utilizing it for successful real-money trading
When you started, you were likely overconfident, but then the market put you in your place.
You developed healthy confidence over time by building your trading system, testing and practicing it, and then ultimately utilizing it for successful real-money trading
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After a big loss, get back to basics. Focus on the trading plan (with any adjustments made to it) and your implementation of it. Get back to what attracted
you to trading in the first place: building or learning a strategy that made money consistently.
you to trading in the first place: building or learning a strategy that made money consistently.
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Trading is hard, so get back to loving and embracing the challenge.
A string of good times can make us lazy, and often a big loss is the wake-up call.
It's the market letting us know that we have drifted off course.
A string of good times can make us lazy, and often a big loss is the wake-up call.
It's the market letting us know that we have drifted off course.
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Practice and Rebuild Confidence
After a big loss, confidence can be low. That means the mind may not be right for trading. Not having a clear mind can cause you to skip trades, panic out of trades (trading not to lose), or be overly aggressive to get back to your old winnings.
After a big loss, confidence can be low. That means the mind may not be right for trading. Not having a clear mind can cause you to skip trades, panic out of trades (trading not to lose), or be overly aggressive to get back to your old winnings.
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None of these is good. Take a step back, trade in a demo account for a few days. If you have been losing, you will likely save yourself money.
Because it's not real money, there is also less pressure, so it's easier to focus on trading, and not worry about the financial aspect.
Because it's not real money, there is also less pressure, so it's easier to focus on trading, and not worry about the financial aspect.
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Start Small
A few winning days in the demo account will raise your confidence levels and put you in a better mental space to take on the markets again with real money. After
a losing streak, start small; don't jump right back to the same position size you were trading before.
A few winning days in the demo account will raise your confidence levels and put you in a better mental space to take on the markets again with real money. After
a losing streak, start small; don't jump right back to the same position size you were trading before.
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On the first day back, trade a small position size. A winning day with a small position size will help build confidence. If you have a losing day, losing on small position sizes is easier to handle than another losing day on full position sizes.
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Get back into live trading at a slow pace. If you're feeling really beaten up, spend at least two to five days in simulation, and when you switch back to live trading, start small and increase position size when you have winning days.
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Even if you win a few days in a row, increase your position size incrementally, so it takes time to get back to your full position size
Some try to rush back into live trading after a big loss, when they aren't ready. They end up losing more Some traders repeat this cycle forever
Some try to rush back into live trading after a big loss, when they aren't ready. They end up losing more Some traders repeat this cycle forever
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After you have traded bigger position sizes, it's annoying to start back with a small position size, but it's for the best.
Bouncing back from a losing streak is
about getting back to basics and implementing a strategy well, not about making money. Money comes from the strategy.
Bouncing back from a losing streak is
about getting back to basics and implementing a strategy well, not about making money. Money comes from the strategy.
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All I ask is that you RT and LIKE for others to learn 📚
Follow @RealJGBanks for more tips like this! $SPY
Follow @RealJGBanks for more tips like this! $SPY
