The Psychology Of Losing Streaks In Trading And How To Deal With Them

How To Deal With Losing Streaks In Forex trading

In trading, consecutive losses, especially in forex, are very common and some traders can’t accept it. Instead, the best traders they try to make the best out of it, learn, adjust their strategy or their money management plan if needed and just get on with it.

But as we all know is not that easy to behave this way. It is not unlikely, if you ever had a number of consecutive losing trades, to have thought that you are an incompetent trader or that you are possibly not fitted for live trading.
You may have experienced anxiety, disappointment and anger at yourself or anyone else that is involved (such as your broker or the market makers). This is a natural human reaction that has a chemical basis; a losing streak activates the production of cortisol, our body’s stress hormone. While cortisol’s primary function is to prepare our body to cope with danger by increasing glucose, the prolonged exposure to it that comes with losing streaks will render us anxious or even sad.
Anxiety and sadness will then work as “containers” for negative thinking. Suddenly, we see the world through those black glasses and we may engage in various unhelpful thoughts: “ I am a loser”, “ I will never make it”, “Should have never traded”.


We all know what follows when you think in this manner… Your anxiety, disappointment and anger increases and with them comes a lot of confusion, feeling scattered, unsure, lacking in confidence and belief. And we all know what this brings us, more losses, more stupid trades without logic, more anger and finally your account is gone

But so what can we do?

In order to exit the vicious cycle of losing streak psychology:

1. Become aware of the emotions that have emerged. Ask yourself: What am I feeling? Am I frustrated? Afraid? Am I Mad?

2. Understand the thinking pattern that brings these emotions. What is your brain telling you? Is it pulling you down, sabotaging you or maybe threatening you?

3. Go back in with much smaller position sizes since your psychology is frayed.

4. Sometimes just watch the markets for a few days and make no trades whatsoever work out a few hypothetical trades in your head to see how you would do if you did trade with actual money.

5. NEVER GIVE UP. most of the biggest losses are followed by the biggest gains

6. No matter the size of the raw loss, take comfort in knowing your still in the game and can live to trade another day…the best traders do screw up, but minimizing the risk, because we realize no matter how good a trade or investment looks, we can always be wrong and if we’re absolutely wrong, we cannot, under no circumstances, risk blowing up and losing our account and be taken out of the game…once you’re out of the game, it’s much more difficult to get back in and be successful like before.

At this stage, you have to accept that losing trades are natural, and are just necessary sacrifices you must make to the market in order to make money: a “cost of doing business”.

If you have any questions, comments or opinions, feel free to post them using the commentary form below.

Leave a Reply

Your email address will not be published. Required fields are marked *