How to Get Out of a Trading Slump

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OK so I'll admit it. This last month of trading has not gone very well for me. As I write this I am in a big drawdown. I've lost confidence in my strategy, I'm feeling negative and find myself being irritable with those around me.

Time to activate the "How to Get Out of a Trading Slump" protocol! Here are 6 things I (try to remember to) do when I'm in this kind of funk:

Remember I've got out of slumps before.

If you've been here before and got back on top then there's every reason you can do it again. What did you do last time? Do the same again. Knowing you've got out of a slump in the past will give you the confidence you need to make a plan and stick to it.

Take a break

Sometimes the best thing I can do it to switch off the screens and walk away for a while. It might be a few days, a week or more. Being in a drawdown can play havoc with the mindset needed to trade well so taking a break is a great way of gaining perspective and resetting your mindset. A bit of distance can work wonders.

Reduce stakes massively

OK, you might have a money-management strategy that includes reducing risk as your drawdown increases but I'm talking about a MASSIVE reduction in risk here. e.g. If I was trading 10 lots I would go right down to 1 lot or less. Risking so little frees me from the fear of losing and getting a string of good trades behind me builds up confidence again.

Look after my body

When I'm suffering a big drawdown I tend to let my health slip. I might start eating junk or skipping the odd run. Looking after my body through decent sleep, food and exercise means my brain is going to be healthier and my mindset more positive about the future. It creates a positive feedback loop with a better outlook and better trading decisions.

Review all trades again

It can be painful to go through the trades that have led to a big drawdown but it's important to face them head-on (after a break if needed). Were they all taken according to my trading plan? Did I get greedy? Any revenge trades? Any pattern with previous draw-downs? No tweaks, just observations. e.g. Was it holiday season with low volume? What can I do differently next time? (take August off).

Come up with a plan

This is the point where a lot of traders throw their strategy in the bin and pick up a new one, only to repeat the same cycle further down the line. Now's the time to come up with a plan going forward and often my plan includes less trading. Most of my drawdowns have been due to overtrading in the past so often the new plan will include reduced trading hours, less instruments or general simplification of my trading routine.

How about you? How do you get out of your trading slumps?

Feel free to comment below.