December 26, 2021 by admin
In trading, consecutive losses are very common and some traders do not take it at heart. Instead, they try to make the best out of it, learn, adjust their strategy or money management plan if needed and just get on with it. It is not always that easy, however, to have this attitude. It is not unlikely, if you ever had a number of consecutive losing trades, to have thought that you are an incompetent trader or that you are possibly not fitted for live trading.
You may have experienced anxiety, disappointment and anger at yourself or anyone else that is involved (such as your broker or the market). This is a natural human reaction that has a chemical basis; a losing streak activates the production of cortisol, our body’s stress hormone. While cortisol’s primary function is to prepare our body to cope with danger by increasing glucose, the prolonged exposure to it that comes in tandem with losing streaks will render us anxious or even sad.
Anxiety and sadness will then work as “containers” for negative thinking. Suddenly, we see the world through those black glasses and we may engage in various unhelpful thoughts: “ I am a loser”, “ I will never make it”, “Should have never traded”.
But what happens as you think in this manner? Your anxiety, disappointment and anger increases and with them comes a lot of confusion, feeling scattered, unsure, lacking in confidence and belief.
There are some typical ineffective behaviours that traders may then fall into such as
If you do engage in some of the ineffective behaviours mentioned above, it is likely that you will end up trapping yourself in a vicious cycle. This is because risky trading behaviors such as overtrading or revenge trading are likely to make you lose again and, therefore, evoke the same unpleasant emotions and unhelpful thoughts that led you to it.
In order to exit the vicious cycle of losing streak psychology:
1. Become aware of the emotions that have emerged. Ask yourself: What am I feeling? Am I disappointed? Anxious? Am I Angry?
2. Understand the thinking pattern that accompanies these emotions. What is your mind telling you? Is it pulling you down, sabotaging you or maybe intimidating you?
Typical thoughts following a losing streak would be:
3. Are you about to make trading decisions according to what you are feeling or thinking? Is this the best way to trade? Has this helped you to succeed in the past?
4. You can choose to break the cycle. Having unhelpful thoughts and emotions is very different from acting on them. Remember that if you act on them, you maintain the vicious cycle.
Instead of acting on your thoughts, keep your purpose in mind and act according to your goals:
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