The Art Of Winning… By Losing
Having a bad trading day? Having a bad trading week? Or month? Guess what, that’s normal! Drawdowns come to winning traders too. How you behave during that drawdown will determine whether you will come out ahead or go further into the hole.
When you have a winning system, there will be days and maybe weeks or months (depending on your style) that are outliers or UNUSUAL because, during those weeks, you feel like you couldn’t make money to save your life.
That’s why it’s essential to have good risk management so you can weather these storms without getting too emotional.
You know me! I like to tell stories, so let me tell you about my week and what I learned about the art of winning by losing.
What happened this past trading week?
It’s Monday, and the markets have been open 6 hours now. The London session is about to begin. Even though it’s a bank holiday, it’s not a Japanese bank holiday, so I decided to follow my routine and my trading plan to the tee with no problems.
Not a bad day. I end up net positive. Tuesday rolls around, and I EXPECT (big mistake) that the markets will be on fire because no one is on holiday, and most traders have officially started trading again.
Well I was right! The markets were on fire! But they were burning me! I only took half the number of trades I took on Monday (all according to my plan), and I had already given back all the profit of the previous day!
To be honest, it wasn’t much, so I shook it off and got my mind right for the next day. I was NOT prepared for what happened next…
I was greeted by losses the ENTIRE DAY! No Holidays, No shortage in market volume. That day I felt I couldn’t make money to save my life.
I’ll admit the Wednesday was a little harder to shake off. I was down by A LOT that day. But still, at the end of the day, I took it on the chin tried to convince myself to do exactly what I did the day before because I followed my plan.
This whole week there was no error in my execution, so I found it within me to wake up on Thursday and do the same thing that lost me so much money the day before. Thursday, I was down again but not as much.
At this point, I mentally prepared myself to end the week in the red (which is not usual for my strategy). It seemed unlikely for me to come back with only one day left.
But Friday came, and I was determined to follow the plan I knew worked. The day off with a bit of profit, then more significant gain, followed by smaller profit.
Then BANG! One Good Trade! I took only 6 trades on Friday, which recouped all my losses for the week AND THEN SOME. I ended the week up, the same amount I was down the days before Friday. Every trade was in the green on Friday!
How to win by losing
The lesson in this story here was staying consistent in my executing of the plan. Through the tough losses, through the doubts of having the positive week that I’m accustomed to, STICK TO THE PLAN!
The plan pulled me out. It wasn’t some stroke of genius or something I did because I’m the sickest trader in the world. I stuck to the proven plan through the losses and won.
If I had lost nerve and cut down my risk, I wouldn’t have finished the week positive. If I had decided to start hand picking trades and not taking the entry signals the system gave me, I might have missed the one trade that made my entire week.
My strategy will have a profitable week 8 out of 10 times. There’s no telling how that week will go, start, or change during the week, but that’s what the data suggests.
That’s the key to my confidence and ability to push through the losses. I know it works! I’ve tried it, I’ve tested it, and I’ve proven it.
I traded the same way in the past but wasn’t too keen on BACK-testing it but FORWARD-testing instead. And in the past, I lacked the confidence to continue trading after the losing streaks I’ve just mentioned.
The confidence came from knowing my system works, SIMPLE. If you’ve been inconsistent in your trading because of a lack of confidence, I suggest the same to you. Put your system through the paces, and it’ll be much easier to shrug off losses.
Don’t bet the farm.
Don’t lose your shirt.
Cut the L.
Keep the W.