How To Deal With A Difficult Trading Day

Even the most careful and conscientious traders will occasionally have a bad trading day. Sometimes, they may even have a bad trading week. It happens to everyone now and then, in life as well as in trading. If you have suffered a painful trading loss, you may even question whether it is all worth it, and be tempted to throw in the towel.

However, what’s important is how we deal with the situation. Most of the time, a step back, maybe a day or two to get a fresh perspective, is all that is needed. It might sound like a cliché, but when things go wrong, it’s an opportunity to learn from the events, so we can take a better approach next time.


The negativity bias

In psychology circles, the human tendency to dwell on negative events is known as the ‘negativity bias.’ It’s not a sign of personal weakness, but a normal human trait that almost all of us have to some degree. Scientists believe that the habit of keeping negative events foremost in the mind is an evolutionary function which is hard-wired into the brain.

This is because in the past, humans had to remain vigilant for predators and threats to health to ensure their survival. Therefore, hazardous events are foregrounded, while more pleasant or benign events can get forgotten. This is still true to a certain extent today of course: children still sometimes learn from getting themselves into a scrape.

However, as adults, this tendency can have a less favourable outcome, as it can lead us to take failure and criticism too harshly. This can become a real problem for some people, as even events which don’t matter in the long run can loom large in the mind. They may wake up in the early hours of the morning, and ruminate endlessly over the same memory.

There are various ways of breaking out of this negative thought cycle. One of the most effective techniques is to challenge the negative thought, by detaching the facts of the case from your emotions, to try and view it in a neutral light, much like an outside observer would.

Once we have examined the negative thoughts and emotions for supporting evidence, often we find that there is little or none. There may well even be positive elements to the situation, which we have failed to take into account.

It can feel uncomfortable at first to face difficult feelings, but it is much more powerful and constructive to face up to them, rather than keep them locked away, eating up precious time and emotional energy. Confronting the issue head on, rather than the narrative that has built up inside our heads, can bring clarity and a new sense of purpose.

For forex traders, this may be a process of realising that making losses is a normal part of trading, and even experienced traders accept that not all of their trades are successful. A failure is not always an event you should take personally, especially in the world of forex.

If you have experienced a bruising trading loss, and you are still having trouble bouncing back from the experience, maybe even questioning whether the game’s worth the candle, then this can open a door to the next strategy…developing a growth mindset.


Developing a growth mindset

There has been a lot of talk about resilience over the past few years, as we have all lived through some difficult times. Resilience is all about the ability to recover from negative events. Some of this may be down to our natural characters: some people are born fighters, while some people seem to lurch from one crisis to another.

Whether this is down to our upbringing and environment, or our genetics, is a huge topic, and not really the issue on hand right now (although it makes for some interesting reading if the topic tickles your pickle).

What is relevant and interesting for forex traders is that scientists believe that resilience is not a fixed character trait, but something that can be learnt by anyone who is open to the idea. However, this is not simply a version of the old advice about dusting yourself down and trying again, getting back in the saddle, and all the rest of those familiar sayings.

In fact, doubling down on your efforts in the belief that you are showing grit, determination, doggedness, and tough-mindedness, may just mean that you are…well, doubling down on failure. Repeating the same actions over and again in the hope that something will turn out differently can just layer on the disappointment.

Psychologists refer to this state of mind as a ‘fixed mindset.’ It can lead us into a cycle of negative thoughts and actions, which can seem impossible to break out of, as we have previously discussed. The ‘growth mindset’, on the other hand, is all about the ability to look objectively at the problem, and adjust our actions accordingly.

For a forex trader, this may mean taking a look over a trading strategy or journal to identify any elements which aren’t working. If you keep a journal of all your trades and the outcomes (which is recommended to help you revise and refine your techniques and strategies), then try and identify patterns which are common to your unsuccessful trades.

You may notice something about your timings, exit strategy, frequency or volume of trades, for example, which is impacting negatively on your progress. Experiment with a different way of approaching your next few trades, and record your progress.

It may not lead to immediate improvements, but it is better than following a strategy which is not leading to consistent profits, in the hope that things might turn around. Making adjustments based on logic and evidence is the best path towards lasting improvements, both in forex and in life.  


Are you REALLY sticking to your trading plan?

One of the most common causes of unsuccessful forex trading is a lack of a solid trading plan, or the failure to stick to a plan. Even if you are a naturally impulsive person who prefers the inspiration of the moment to forward planning, you still need to follow a trading plan if you want to start taking consistent profits in forex.

The trading plan is all about risk management, and it should be drawn up after you have done as much research as you can into market analysis and behaviour. It should address the basic issues, such as how much capital you want to risk per trade, how many pips you will target in each trade, and what your rules for entering and exiting trades are.

The plan should be referred to for every decision that you make, because otherwise, you will be vulnerable to making emotion-driven choices, which have no basis in considered analysis of the markets.

As we have previously discussed, it may sometimes be necessary to make tweaks and changes to your plan, rather than continuing to repeat an unsuccessful pattern of trading. However, this should be done in an analytical and informed manner, and not based off your emotions, such as a desire for revenge, to make good on a loss, or greed for profits.

This brings us to the next point…


Have you read up on trading psychology?

We have already discussed how fear can lead us to become mired in a sea of negativity, where we become too sensitive to perceived threats. Of course, sometimes we need a sense of fear to stop us making dangerous mistakes. However, in forex trading, an overdeveloped sense of fear can lead to unsound decisions.

It is natural to fear losses, more so than to seek profits. This may mean that you are closing trades too early, at the first flicker of bad news, or on the other hand, entering trades too readily, for fear of missing out on a good profit. Neither of these approaches will amount to a sound long term strategy.

Even more dangerous than fear is greed; the desire to make bigger profits as quickly as possible. It can be intoxicating, giving you an artificial sense of power and control. However, forex trading is all about risk management, and greed is the antithesis of this, leading to illogical and destructive behaviour.

Greed is related to two other powerful emotions which can ruin your prospects of successful trading: revenge and excitement. If your desire to make profits has been thwarted, it can spur you on to take even more aggressive risks in an attempt to recoup your losses. This will lead to poorly thought-out decisions, based on emotion and not logic.

Lastly, the euphoria of success can create a heady cocktail of emotions which makes you overconfident, and take risks which are not supported by your trading plan. To avoid falling prey to any of these emotions, the first step is to acknowledge that we are all human, and we are all prone to them—it is normal, and not a sign of weakness.

If you are having a difficult trading day, don’t beat yourself up. Just step back and step away from your emotions. Review your trading journals and plan if need be, and return to trading with a clearer mindset, and the willpower to choose logic and strategy over instinct.


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CFTC Rule 4.41 – Hypothetical or Simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, because the trades have not actually been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs, in general, are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown.

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