First, you take one loss – no big deal.
Then another comes along and you get frustrated. A few more and you’re boiling with anger.
Pretty soon you’re down big and filled with rage.
In trading, sometimes we lose multiple times in a row, whether we’re off our game or just unlucky.
Most of it you can’t control.
But there is one thing you MUST CONTROL – YOUR REACTION.
I’m no stranger to ‘overtrading’ or ‘revenge trading.’
However, I know how to both recognize and control it, and I’m going to teach you how to as well.
Sometimes, the skills that make most of us great in business, buckling down and trying harder, actually hurt us in trading.
To become a better trader, you need the next-level talents of the CEO – the mindfulness to recognize the signs of overtrading and tools to squash them.
To thine own self be true
In the business world, you do a self-assessment at the end of every year. You and your boss sit down and discuss your goals, what you want to achieve in the next year, and how you plan to do it.
One of the most BRILLIANT things I ever learned came from a friend of mine.
You see, most business books tell you stupid stuff like turn your strengths into weaknesses.
WRONG!
Eastern philosophy, meditation, and the serenity prayer got this one right.
Rather than trying to change who you are:
- Accept your strengths and weaknesses as they are
- Try to make your weaknesses tolerable and your strengths even better
This counterintuitive approach is one of the best ways to stop yourself from overtrading.
Yes, it involves some introspection. Just be honest with yourself.
Most people don’t have an iron will, never worrying about a thing, brushing off any loss with easy.
That’s not reality.
The vast majority of people are neurotic messes with constant bouts of anxiety or frustration that take hold of our actions and suppress intelligent thought.
Handling the destructive tendencies
First, accept that those reactions to losses or even wins are not just normal, but programmed into most of us.
Think of it this way. When you touch a hot stove, your hand recoils immediately. This is an involuntary response.
The same thing happens with overtrading. Like it or not, our emotions take over as a reaction to the outside world.
So, the first step is recognizing this is occurring. At first, it will be an afterthought. As time progresses, you’ll recognize it earlier and earlier, and soon see it before it happens.
Here are some clear indications it’s happening.
- You constantly think about getting back to breakeven
- The number of trades you take in a given day doubles
- Losses or wins for the day are much higher than normal
- You see setups everywhere
- You’re trading stocks or instruments you never have before
- On many trades, you rationalize moving your stop loss
- You confuse adding to a position with doubling down on a losing trade (this is a tricky one)
Also, I found that journaling helps to both identify the problem and lessen it. The act of writing down the trades sort of acts as a confessional, laying out the problems in black and white.
Coping with your inner demons
It’s not easy to admit you have a problem. When you do, there are a few steps you can take.
First, and the most obvious, take some time away from trading. Most traders get so involved that they don’t look up from 9:30 until 4:00. It’s a tough habit to break.
If you’ve ever tried leaving your cell phone off for a day, you’ll know what I’m talking about!
To help yourself stay away, create a plan to reintroduce yourself to trading. Come up with a time and strategy to get back into the swing.
As you move back into trading, keep things small. Don’t overextend yourself. It helps if you have limits on the amount of time you spend in front of the screens, total losses allowed in a day, total trades, or some other measure that forces you to pull back some.
The main goal with all of this is to recognize the situation and respond not react.
When musicians learn a new piece, they use a metronome and build up speed over time.
Trading should work the same way.
Focus on the fundamentals of your strategy, ensuring you make the right decisions. Then add elements slowly.
If at any point you think it’s about to get out of hand, take a couple of steps back. Solidify yourself. Then, move forward.
Use others for support
Therapy isn’t something for when things get really bad. In fact, learning from others, talking to them, and sussing things out works amazingly well.
A lot of the time you’ll find traders in the exact same boat as you. And let me tell you – that can take a huge weight off your shoulders.
One way to strengthen your core skills and learn from others is with my Profit Bridge package. In this package, you’ll get not one, but TWO of my ebooks along with my Bullseye Trade of the Week.
It’s a great way to dip your toe back in with my best-handpicked trade delivered to your inbox first thing Monday morning.
Click here to learn more about Profit Bridge.
