Slump Busting Techniques for Career Traders

Author: Linda Raschke

MarketClub Trading Service

There are two kinds of traders... those who have had a slump and those who will. Think about this...the most successful traders are the ones who have lost the most money. The majority of great traders have gone through long flat periods at some point in their career. Winning and losing periods can seem to come in streaks. But just about all extended slumps have a psychological reason behind them. Why is it that nobody thought it was possible to run a 4-minute mile, yet when it was broken, within a few weeks 7 other runners also broke this barrier? The human species did not change...a psychological barrier was broken. Your belief system is always going to be your main weapon in pulling yourself out of a slump. Let's review a few things. Let's say you have decided upon your trading method. You also have the second part of the equation - money management rules. You go back to your screens, monitor the markets, yet find you still aren't pulling the trigger. You still don't feel comfortable following your rules and you still have a difficult time exiting big losing trades. What is missing? The psychological part of trading is obviously very important yet that is the side that people spend the least time examining. How many people are willing to admit that the battleground isn't the markets but what is within you? Well, the more you talk with other traders, the more you will learn that we all got through various common experiences. Most traders have run the gamut through all the classic mistakes. But what distinguishes the ones who can ultimately overcome them? Are there any psychological tricks we can use? The markets are an interesting, stimulation game, but they are also emotionally and, at times, physically challenging. Just like boxing, you have to learn to take the punches. The mental side can be summed up real beliefs, on-third concentration, and one-third managing the stress. Learn how to deal with distractions. They will be present almost every day. One of the top traders in the business has dealt with every distraction in the problems, detached retinas, a divorce, his dad has Parkinson's disease, he owns other businesses and has brought companies public. Oh, and he has minimal computer knowledge. He is, though the consummate tape reader which demands a lot of concentration. He is also a countertrend trader, which is a style that inherently carries a high degree of risk. But this trader is the ultimate risk manager. When he is in a trade, he either has resting stops in place or he is giving it his full attention.

You will have more confidence if you are following a defined methodology. You must feel that you are making the right play and not worrying about the eventual outcome. It is OK to make the correct play and not have the trade work out. Don't worry if the price goes a little bit higher after you sell it - if you made the right play, the odds will be on your side that it will soon pull back lower again. follow your game plan. Learn to put mistakes out of your head quickly. Let them go.  There is nothing you can do when a mistake has been made except to correct it immediately. There is nothing you can do to undo the damage that has been done. It is like cheating on a diet. Once you have eaten that chocolate cake, all you can do is get back to exercising to work it off. So it is with trading and making back losses. Get back to making trades. The sooner you can clear your mind and start trading again the faster you will make up your losses. Many traders actually trade their best when they are under the gun, so to speak. Making back a big loss is the most empowering feeling in the world. Once your have pulled back up to even, you are ready make new account highs. Stress impairs your judgment. learn to recognize when your are under duress. Your mental state outside the markets will affect your decision making ability during market hours. A person can have knowledge, but if he doesn't have the presence of mind to handle a stressful situation, all that knowledge goes out the window. It takes confidence to be flexible. It is easier to change your mind when you are relaxed. When you are tense, it blocks the energy and this blocks the mental flow. You must have confidence that you are going to win. Know your game. find a way to frame the situation to be a positive one. Trust yourself to let your best judgment shine through. You must have the mental confidence in your own decision making process. Go into the markets confident but not cocky. You have to recognize that we are all creatures of emotion. Intelligence is using that emotion at the right time in the right way. Intelligence is not being a rocket scientist; it is reacting in the right way under pressure, or using good judgment. It's making the right decisions when they need to me made. Why can a C student be a more financially successful person that an A student? It might come down to who has better common sense and good judgment. Experience is learning to recognize your mistakes when you make them.

However, experience doesn't always keep you from making the same mistakes! The best traders learn to trust their best judgment at the time. You must train yourself over and over as to what that judgment must be. Become a high probability judgment machine. The price model in your head must become second nature. Capitalize on short-term opportunities for quick profits. Study the longer-term opportunities. Inn other words, scalp the easy profits and lie in wait for the bigger trades. Learn to concentrate your focus on making money and quit thinking about the ways you can lose money. It is better to make the trade and assume some risk than it as not to try at all. The way to increase trading profits is to continue to do the same thing but do it on bigger size. Once you make back the first draw down on a bigger size ( which may invariably happen right off the bat), your confidence will triple. Great traders have learned how to take a loss. Know when a loss is going to get worse and act defensively. Strive to always be at your high water mark. This level is al time highs in your trading account. When you have a draw down, there is no better satisfaction than making it back up. Think all the time about succeeding. You will have your best feel for the market when you have a position on. You never have a better feel of the pulse of the market than when you experience it first hand.


About the author:

Linda Bradford Raschke began her trading career in 1981 as floor trader making markets in equity options on the floor of the Pacific Coast Stock Exchange.  In 1984 she became a member of the Philadelphia Exchange, where she expanded into trading futures.  In 1987 Linda left the trading floor to concentrate on trading futures only.  However, she continued her 16-year study of technical analysis and price behavior, developing proprietary trading tools, methodologies, and systems based on her floor-trading experience.  Linda continues to teach traders how to trade and is actively involved in presenting trading workshops and online seminar for companies such as the MarketClub Trading Service. To find out more about MarketClub, see what others are saying about this tool, visit the MarketClub Trading Service review.

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