You go long and the market immediately goes down - you go short and the market immediately goes up. That's 2 consecutive losses AND you are getting a little 'anxious' so you don't take the 'next' trade and it of course works. BUT to make the situation worse you then 'chase' the entry and it immediately reverses - another loss AND this is 3 in a row. Ok 1 more try - this can't happen on every trade can it - pray mode?
This time though you will be real clever. You have at least noticed that the market is in a range AND it's the bounce from the low/retrace from the high that is causing all the problems. So this time the next trade you take will be a range extreme fade AND the hell with your trading method. The market is at the range low AND per your new ‘on the fly’ plan you go long AND the range immediately breaks out giving you consecutive loser #4 - trading against a method trade that is going far enough to pay for the previous 3 losers and make you net ahead.
Now what are you supposed to do – QUIT? AND to be sure that there is no more temptation – your throw your computer out the window and dive out right behind it. You are in a trading psychology spiral.
WHAT is a Trading Psychology Spiral?
I think of a trading psychology spiral as the transition from trading losses that you have accepted both as a part of your trading method AND as something that is inevitable in trading, into a surge of emotions that continually builds to a point where you can no longer accept anything. As this eventually ‘spirals’ out of control – trading method becomes completely ignored AND is replaced by emotional responses and decisions for everything that is done. Even if quitting was really the only viable thing to do at the time, the tpsych spiral can cause an emotional response where this isn’t considered until the situation becomes so desperate that the trader can’t take it any longer AND does have to quit.
This isn’t a discussion about emotions and trading, and the various fears and issues that keeps a trader from trading to begin with; as we know, emotions are an inherent part of trading – you learn to control them OR you can’t trade. This is a discussion about emotions that are typically controlled well enough so that you ‘can’ trade AND then something happens where the trader loses that control and their emotions spiral - a series of consecutive losing trades is a root cause for this happening.
This also isn’t about something that happens only to inexperienced and unprofitable traders. There are going to be those times where nothing a trader does will work, and that result is going to be a series of consecutive losers. So the situation is the same, it’s the reaction that will be different. For instance, traderA may go into a panic causing them to spiral out of control, losing all self-confidence and self-trust, and ultimately more money than was intended. On the other hand, traderB may go into a period of revenge trading, coupled with an increase of their trading size, as they are ‘sure’ that each next trade is going to bring them back to even. Also a spiral out of control AND as the losses continue, ultimately a loss of more money than was intended.
Controlling The Trading Psychology Spiral
consider: each time a trading psychology spiral occurs AND you go out of control - the quicker the next spiral is going to occur AND the faster you will go out of control when it happens. this is going to continue until trading becomes to painful AND you will not be willing to trade any longer.
consider: it is better to work through the emotions instead of quitting. quitting is too easy AND provides no solution or aid in preventing this from coming back and intensifying each time you have a rough period. as well - you have lost the ability to 'count' on yourself when you need to do so the most. to control a tpsych spiral before you go out of control is a tremendous win in and of itself - also do this and get your trading back on track AND you will have made gains the value of which you can't imagine as you will know that you may have losing periods BUT you can trust yourself to remain in control and not magnify the damage.
Trading Psychology - IF Lose Discussion
consecutive losers in short time - becomes thinking that you don't know how to trade
method trades BUT losing - the method doesn't work
Trading Method - IF Lose Discussion
were the trades really method trades? IF yes - retain confidence and stay with the method based on your experience and consistency of repetition over the larger number of trades. IF no - be sure that you are only 'base' method trading - it is fine if these trades lose AND there is no way to limit those times that they may be consecutive.
Self Awareness AND Realization
transition - normal trading emotion to anxious/start spiral to out of control
be aware - what do you most want to remember/think about to 'stop' the spiraling
Read More: http://www.tradingpsychology1.com/consecutive-losses-trading-psychology.html
