The most common theme I see from traders is when they are in a "slump" and want to break that habit and move forward in their trading. As a trader it is important to know that we are all human and we all fuck up. We buy the highs and we sell the lows, we compound our problems and overanalyze. We miss trades, we overtrade, and we don't take trades. The above should resonate with you, if it doesn't you're a fucking liar, go away.
I'm often asked:
"What do I do to change my trading? How can I be profitable (again)?"
I'm asked this so often in fact that I'm going to dedicate a post to it.
The craziest thing about the stock market is its ability to mind fuck you repeatedly. If you trade long enough you will find that you run the gambit of emotions. From frustration, rage, anger, happiness, euphoria, annoyance, fatigue, and many others this market will eat you alive if you let it.
The first thing you should do as a trader is learn to keep a level head and relax. You need to be as level headed as you possibly can be. Practice never getting too up and never getting too down. Your wins are not your own doing. The market is built on fundamental odds/statistics and it is your job as a trader to check your emotions, mitigate your risk, and position yourself (relative to your own risk tolerance) for optimal success.
If you can temper your expectations and your emotions you will be well ahead of the curve.
Hate to break it to you but if you're playing the markets for a "Get rich quick" situation, you should just quit now. Save your money, buy something wasteful, go on vacation, start a business, whatever, just don't waste it on the markets. In order to be good at this business, you must be able to adapt quickly to scenarios you did not expect. That takes hours and hours of analyzation, pattern recognition, and discipline. Sure, when you're right the markets will print cash for you like an ATM gone haywire, but it will take the time you're not trading to get you to that place.
FIRST THINGS FIRST
The very first thing you should do when you're struggling or going through a trading drought is absolutely nothing. That's right, I said nothing. Let me go into detail behind the mindset here.
From my experience, I've realized that most major losses I've had have come from reckless trading and/or trying to make up for losses I'd had. I've learned that when I'm on a "bad streak" it's best to initially ratchet down my position size. If this does not work, I will simply study the market and make notes of entries and exits and see how I "would have" done. If that doesn't work, and I'm just way out of touch, I will just shut it down. I will take a day, two, three whatever it takes to just reset. If I return and I am still not getting in sync, I will simply just shut down again. I will continue this practice until I feel mentally prepared to take on the rigors of day to day decision making.
Since the market leaders often change, I find it best for my style to keep a primary list of about thirty stocks at any one time. This doesn't mean that I don't chart or track other stocks, but simply on a day in and day out situation I will track a list of about thirty stocks that I feel comfortable with. This list will change given market sentiments and breadth.
If we are bearish, my list will consist of stocks that I primarily want to short on breakdowns. The opposite, of course, is also true. Sometimes my lists just are not in sync with the market itself. Nothing on my list will stand out. In that case, I will erase the entire list.
Thats right, I will erase the whole list and start from scratch. Since I am a momentum trader primarily, I will scan through charts and find where I think the momentum is going. Once I've found this, I will ONLY (I cannot stress this enough) add the strongest stocks that fall in line with the market in general. I will not watch the bullshit (GPRO FEYE etc). I will stick to the top shelf stuff.
The last thing I want to stress is when things don't go your way it is very important that you keep your cool. Not keeping your cool can really fuck you. Trading is all about mastering the mental and emotional battle with yourself more than anything. It is paramount in my opinion to relieve the outside stresses you face and not let them spill over into your trading. Doing this will help your results. It is also important to be very honest with yourself. You need to make judgments about when things are not going your way and take the adequate time to rebalance.