The Losing Streak - Marty Schwartz Every trader faces it. Only the winners know how to handle it. The dreaded losing streak rears its head every so often and attacks every great trader. It eats away at your judgment; it saps your confidence. Sometimes, it can take you so low that you think you`ll never get out. You`re sure that something has gone wrong, that you`ve lost your touch, that you`ll never be a winner again. When you`re in the middle of it, you think it`s never going to end, but mostly, your judgment and rhythm are off and what you have to do is stop and regain your composure. The best way to end a losing streak is to cut your losses and divorce your ego from the game. I learned this lesson many years ago at the crap tables in Vegas. The old clichè says "never send good money after bad", and it`s true. You have to manage your resources and not lose too much of your stake. Many people when they`re losing increase their bets; they double up hoping to win it all back on one roll of the dice. That strategy can be devastating. The best way to stop a losing streak is to STOP! STOP THE LOSSES, STOP THE BLEEDING. Take time off and let your intellect take charge of your emotions; the market will be there when you return. But believe me, this simple advice is much easier to give than to take. In August 1996, I was in the worst losing streak of my career. What was driving me crazy was that I would see the trades, but I was so scared of losing, I wasn`t thinking about winning. This fear of losing was slowing down my reaction time, and while I was seeing everything, I was reacting later and later, which meant that I was taking more risks, not less. What I had to do was to step back and recharge my batteries, but I couldn`t stop. A guy called me and wanted to play some golf. I knew that I needed a break so I told him I`d play eighteen, but as I got up to leave, I couldn`t go out the door without a piece of the action. I couldn`t let the market go up without me. I bought ten lousy contracts and ended up losing twenty-five grand. It ruined my day and further sapped my confidence. You can never shift from reverse to first gear without first going through neutral. YOU MUST FIRST CHANGE THE DIRECTION OF BAD TRADING BY FIRST SHIFTING TO NEUTRAL. YOU MUST STOP. What happens is that as your fear of losing rises, your emotions start to short-circuit your intellect and you no longer have confidence in what you`re doing. Stopping lets your emotions calm down and lets you reestablish your momentum with your intellect. Remember, time is always your ally. Use it to relax, clear your head, and regain your energies. Once you`ve stopped, digested your losses, gone through a period of preparation, and feel comfortable with your work habits and methodology, you`re ready to start trading again. The best way to do that is to trade small and to concentrate on being profitable. DON`T START BY TRYING TO MAKE A KILLING. When I came back, I`d see a trade I liked and I`d do it small with a very tight stop, so if I was wrong, I`d get right out. All the time I kept telling myself, make little profits, make little profits, make little profits. Black ink, black ink, black ink. It`s all psychological. I felt sick and I wanted to make myself feel good again. I wanted to regain my confidence because CONFIDENCE IS ESSENTIAL TO A SUCCESSFUL TRADER. I had three contracts the other day, which is a tiny position for me, but I ended up making $15 000 on them. Fifteen thousand dollars is real money, and I took that and built it into $40,000 the next day, and all of a sudden, I`m hot again, and I feel great. If for some reason this process doesn`t work initially, try it again by stopping longer and coming back to trading even smaller. The most important thing is to protect your trading capital until you can regain your equilibrium and put all the shadows of the losing streak behind you. Losing streak are an unfortunate part of the game, but if you are a good disciplined trader who can shift into neutral, the losing will end and black inc will start to flow again.
If you don't want to switch to Longs I'd atleast stop trading until there is some selling pressure out there. I used to if Bull market run 2/3rd's long and 1/3rd short, Longs in bullish sectors and shorts from bearish sectors, any bearish sectors around this time ?? Stick to shorting them ? That way, Bullish day your Longs make loads, shorts lose a little and bearish days longs lose a little and shorts gain a load.
Gamblingman, I suggest it may be worth looking at psychological aspects of your trading. It is not unknown for a trader to be prone to 'self - sabotage', if the trader hold some subconsious belief which conflicts with trading profitability. This can be the result of a change in personal circumstances - eg if the trader has remarried/entered a new relationship, but maybe deep down believes that he has made a mistake, and that by failing in the markets, he can return to his/her former situation. Not as nuts as it sounds you know.... Maybe some issue in your life which conflicts with consistent trading success....? Maybe there is some reason you chose to call yourself 'Gamblingman'....
Hopefully it'll turn around for you soon. Maybe just a bad patch and your EDGE will kick in again soon.
That's probably the area I'm focused on the most. Not that I've any particular skill set analyzing this aspect. No life changes other than I hit 190 pounds for the first time in my life when I started this thread. Well I guess kids were home from school, but that shouldn't distract that much . As far as the name goes, it's more a life believe, life's a gamble in many aspects, some work out others dont but in general you try to make the best educated decision on each and one. Now back to the results. If I wouldn't have a single position on and someone shows me a S&P or nasdaq chart I'd be short the next second, so while it may be self sabotage, it's my core believe that rallies like this are unsustainable. That's about half the loss. The 2nd loss is the auto-trading system, that thing hasn't been changed in several years and while it also does perform badly in this type of market (it accounted for more than half the losses the last two weeks), it is not impacted by psychology and within it's draw down parameters, hence the assumption that this is a slump rather than something more serious.
"If I wouldn't have a single position on and someone shows me a S&P or nasdaq chart I'd be short the next second, so while it may be self sabotage, it's my core believe that rallies like this are unsustainable." I agree about being unsustainable, BUT.... I believe that shorting is more difficult that trading to the long side. Timing when shorting strength is VERY tricky. Why should your entry be the high, or even near the high ? A strong rally is not a trading signal (or if it is, it's more often a signal to wait for a pull back & get long...) Bull markets tend to grind higher, which is horrible when you are short, and you can see that sort of move all the time. (The grind higher is being driven in part by the shorts closing when they cannot stand any more pain.) Sell - offs tend to be faster, hence the familiar spike down and rapid rebound, we see that sort of move every day. I believe that the grind lower type of move is rare, as is the spike high & rapid retreat. Not saying they don't occur, but they are rare. Interesting discussion anyway.