4 Ways To Get Out Of A Trading Slump

It may make some of the diehard technical analysts cringe a little, but trading is as much an art as it is a science. Like any art, execution of your masterpiece is going to come and go. Sometimes you're painting the Sistine Chapel, other times you can’t coat a fence.

Metaphors aside, every day trader who puts any amount of time into the practice of trading is going to hit a slump. A few days, a week, maybe even a month in which none of their positions are playing out like they planned and their indicators might as well be plotting tidal patterns for all the good they’re doing.

In situations like this, frustrated traders are prone to make some rash decisions that will likely end up deepening whatever rut they’ve found themselves in. Forcing trades, chasing price, averaging down. I know, I have been in that position and done those things too many times to count. We all know intuitively that frantically pursuing profit doesn’t work, but these rough patches can make drive you to self-sabotage, particularly when you are just getting started.

But sometimes nothing is exactly the best thing to do if your stock market muse has left you. Still there are other methods that you can try to break your losing streak and pull yourself out of a slump.

Review Your Records

One of the best methods for getting out of a slump is to simply recognize and evaluate what, precisely, you have been doing to so consistently come out on the losing end.

I do this by reviewing my trading journal. If you don’t keep a trading journal, I recommend you start one. Not only does having a daily record of your trades help in situations like this, it also keeps you observant while making trades, which will keep you from goofing up because you weren’t paying close enough attention to your moves.

During a slump, take an afternoon to review all of your underwhelming trades in order to pick them apart, compare them, and diagnose exactly where each one went wrong. This rarely results in some huge epiphany that turns your record around overnight, but it does help to develop a better sense of the habits and predilections that may be sabotaging your efforts.

Change Your Perspective

Sometimes it’s less about you and more about the market. Something that looks like it should be an absolute breakout suddenly tanks. Or what seems like a top turns out to only be the start of a two-point run. These happen, and seasoned traders can adapt to them, but if you consistently find yourself off-tempo with the markets you might need to broaden the scope of your research.

Day traders can be somewhat myopic when it comes to their 5-minute charts and volume indicators. Expanding your time frame and looking at long-term price action could reveal that extended trends of a stock are positioning the chart in a completely different direction than what you’ve been anticipating. Broader catalysts, like sweeping sector-wide news items or insider action can also influence the physics of your trades. But the critical thing is to break out of the current paradigm you are laboring under and attempt a new tack.

Modify Your Goals

I will be the first to advocate for remaining ambitious in the face of adversity, but sometimes recklessness can feel a lot like ambition. Those tactics mentioned above, of chasing trades and averaging down, come as a result of desperation and a futile attempt to brute-force profitability.

If you simply cannot find your way out of a pattern of losing trades, your best bet is to lower your threshold for your benchmark for a successful trade. Ego aside, once you begin to hit your lower benchmark you can begin working your way back to vying for larger and larger returns.

While at first it may seem like a step backward in your trading, sometimes you have to go back to go forward.

Walk Away

As I said in the beginning, sometimes the best strategy, when all else fails, is to simply take a break. Designate a day or two to give your trading platform a rest and reflect. Maybe get outside. The stock market can be a mind game, and your odds of winning that game drop significantly if you’re constantly stressed and angry about your recent P/L.

I want to close this article by encouraging anyone running up against a run of tough trades to adapt these strategies, mix them up, and keep plugging away.

But persistence does pay off, and it will teach you to be a better trader. The critical thing is to keep aiming for improvement.