I’m sure that for most traders out there it is difficult to deal with a couple of losing trades in a row. I am no different.
It is during such periods that we can start doubting our trading strategy and ourselves, we start blaming the market, the news and other things. But the reality is that trading wins (W) and losses (L) comes in clusters. If we can accept that 100%, our trading can improve.
What do I mean by trading wins (W) and losses (L) comes in clusters?
Let’s say we have a strategy that has a win rate of 50%. With a win rate like that we would all love to see 10 trades look like this:
W L W L W L W L W L
In fact, many of us might even assume that it will look like that, or something very close.
But in reality 10 trades can come in any combination of wins (W) and losses (L) like:
L W W W L L W W L W
Or:
W L L W W L L L W L
Or:
L L L L W L L W W L
Or:
W L W L W L L L L W
Or any other combination that you can imagine. Some are more likely than others, yes. But this is trading where the outcome of no single trade can be predicted ahead of time. My point is that over any number of trades the wins and losses won’t be distributed evenly and there won’t be some sort of predictable pattern to it. Wins and losses will come in clusters a lot of the time. And just because you have a strategy with a 50% win rate doesn’t mean that a loss will always be followed by a win.
There will always be consecutive losses, whether your strategy has a 50%, 60% or 80% win rate. Yes, there will be more winners than losers when you trade a strategy with, say a 70% win rate, but there will still be clusters of winners and losers. Your job is to accept this as a part of trading, to not bail on your strategy and trade through the losers in order to get to the winners.
How can we make it a little easier to trade through those clusters?
It’s all the usual suspects:
- Backtest your strategy.
- Make sure your strategy fits your daily activities and suits your personality.
- Stick to your strategy.
- Risk small.
- Don’t trade with money you can’t afford to lose.
- Be patient and be disciplined.
- Take a long – term approach.
The above list is not complete. Your job is to find out what you are struggling with and to start working on it..
Thanks so much for reading, I really appreciate it. Hope you all are well and safe.
Thanks and Regards,
Trading SOS SOS