Why Red Days Happen And How To Move On

It's the final few days of a really successful 2017, so of course I've posted one of my biggest red days of the year.

To a certain degree, traders get used to losses pretty quickly. They have to, or else they just stop trading. However, even traders who stick with it, build a strategy and spend years in the market still wrestle with red days, why they happen and how to move on.

As to the first part of the title of this piece, how red days crop up, there are infinite ways a trading day can go downhill. Some days, you and the market are just not in sync. Other times your timing might be off. Commonly, after losing one or two trades, you end up chasing prices and grasping at whatever chart looks even remotely favorable.

My recent red day was largely due to a bad assumption. I thought the strength I saw in Longfin Corp. LFIN from a previous day would translate into a similar stock, Net Element International NETE. In hindsight, I can identify the mistake in that premise, but in the moment, after two losing trades, I ignored my better judgement and ended up further in the red.

The specifics of each mistake will obviously vary, and that's what can ultimately lead you to repeating them. That's why I recommend traders identify the circumstances that lead to those kind of mis-trades and take a step back when they feel themselves making rash decisions.

When it comes to moving on, I've heard dozens of different approaches.

There are some meticulous traders, those who keep a comprehensive log of their trading days, write down, reflect and research what went wrong, whether they've done something like that before, and what they might do in the future to avoid the mistake again. While I keep track of my trading activity, I haven't found this intensive method to be as productive—but I can see the benefit.

I personally like to look back at any mis-trades I make on a particularly bad day and set goals for the next day that correct the bad decisions and enforce good behavior. It might sound psychology 101, but nothing instills good trading habits like following a loss with a big win.

Ultimately, the best way of getting over a loss is to get back in the black.

Disclosure: Warrior Trading is an editorial partner of Benzinga.