Weekly Insights: How to Handle a Losing Streak

How to Handle a Losing Streak


I doubt there is even one non-rookie trader reading this story who has not experienced at least a small run of poor performance in trading futures. I have said before that most successful veteran traders have more losing trades than winning trades in any given year. The key is maximizing profits on the winning trades and minimizing losses on the losers.

I will also argue that at one point or another in most traders’ experiences, they, too, have felt like “lousy traders.” I certainly have. (Those who say they have never had a run of poor trading performance or felt “lousy” about a trade or trades are likely either lying or completely out of touch with futures trading reality.)

So, what is a trader to do when losses start to pile up and winners become scarce? Here are a few tips that I have picked up over the years from some of the best traders in the business:

  • Do not overtrade. If you are trading several markets without success, cut back to trading one or two markets. You can follow fewer trades more closely and document your success or failures more easily. Plus, your trading account will not be drawn down so quickly.
  • Keep a detailed trading diary. If you keep a good trading diary, you can go back and see if there is a common thread among your losers — and your winners. Then, make the proper adjustments.
  • If you are not trading that many markets and still racking up losers, take a break from trading for a while. Gather your thoughts. You may want to “paper trade” for a while to get your confidence back. Then, if you are still losing on paper, you will want to look for other trading methods.
  • If you are losing money trading, DO NOT try to score a home-run-type trade to get back to even or the plus side in a hurry. In fact, do just the opposite. Make smaller trades that risk less capital, until your performance starts to turn around and you can resume your normal asset allowances for trades. Successful traders survive the rough waters by hunkering down and being conservative.
  • Exhibit patience and discipline. I have preached about this before. Are you following a trading plan that you devised before you put on the trade? If not, you should be. Are you shooting from the hip (no exit strategy in place) after initiating a trade? If so, that could be part of your problem. On the patience issue, are you impatient? I have talked to successful position traders who may only trade a few times a year. They wait for what they feel is that “perfect set-up” to occur. If you are a position trader (as opposed to a day trader), you do not have to be “in the market” all the time. Wait for the good trades to develop and do not chase markets.
  • Be confident. Have faith in your trading methods. And if you don’t have faith in your methodology, why not? If your methods are really not successful, find something else. Read some of the many books out there by the successful traders and how they got there. But be cautious of the person who wants to sell you some so-called successful trading method for big bucks. (See the next item on hard work.)
  • Work harder. Do not expect to produce winning trades if you are not working very hard at trading. Do you know well the fundamentals of the markets you are trading? Even if you know technicals well, you should have at least a good understanding of a market’s fundamentals. Here is an example: Let’s say the charts and technical indicators look bullish for corn and it is the day before a major USDA report. Smart traders likely will not initiate a trading position in corn the day before a big government report is out.


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