As a trader, you will encounter these two most difficult phases which can make or break your trading career...I have gone through both of them and I am going to share how I dealt with them so that you don't suffer...
The First Phase : When you have strings of profits
To the surprise of many, this is very difficult phase. You have strings of profits. Whatever you touch, becomes gold. I know many of you are smiling because you have gone through this.
Now many of you may think, how on earth this is difficult phase...I mean profits are coming. Let's enjoy. What is to bother?
'This is the phase most vulnerable to your trading'
In this phase, you feel that earning money in the market is piece of cake and you have GOT THE MONEY MAKING MACHINE which will make you super rich in no time.
Normally, in this phase, a trader will become overconfident and will risk beyond the threshold limit because he wants to get rich quick and soon he starts taking more and more risk...
And the worst is those risky trades also go in profits giving you windfall profits.
But the sand castle collapses with one big wave...
One big loss wipes out all the profits earned in past weeks/months...
And you are completely devastated...You did so much of hard work and earned so much just to see getting wiped out in one instance...
So, what should you do in this case?
Here, what will come to your rescue is...
Ask question to your trading system. What should I do now? It will give you correct answer...
"At no point in your trading journey, you should risk more than 2% of your trading capital on any trade. Period."
This phase will not last long and you will soon come on ground with little bruises...
Phase Two : When you have strings of losses
This has happened with me. I have had 29 strings of losses in a row in Silver Futures which I traded in 2015.
This can happen to you as well...
Do you want to know what I did after this and what happened to my trading after 33 losses?
Honestly speaking, I put 30th trade with same discipline, with same trading setups, with same position sizing as I did with first trade.
I simply asked my SYSTEM, what should I do? It answered me to take trade as per the rules of the system...
The 30th and 31st trades were in profits and they not only recovered all my losses but gave profits over and above those losses (since I was trading trend following system).
So what should you do if you have these strings of losses??
FOLLOW THE SYSTEM without second thought...
Just a word of caution here!
You can not afford to trade a system which is not good. You need to periodically review the system to check its viability because market keeps on changing and you need to modify your system little bit to adjust it to the new market conditions...
But in my case, I knew that my system was not bad, I was just having a bit of hard luck and I needed to keep my cool and trade with discipline...
That phase in fact taught me biggest lessons of my trading and gave me tremendous confidence in trading, It taught me that
i) The Market rewards the disciplined trader
ii) There WILL be a bad phase in your trading
iii) You can not override your SYSTEM
Do let me know your views in comments...
