““When you are getting beat to death, get your head out of the mixer”
– Richard Dennis, quoted in Market Wizards, by Jack Schwager.
It’s been a rough week. Between trades I exited prematurely and ones that I didn’t exit fast enough, several have just turned ugly and misses were spectacular (read Palladium). I can tell it’s affecting my judgement and my confidence.
The temptation is to “trade my way out of it”. My competitive nature wants me to just work harder and try harder. That attitude isn’t necessarily wrong, it depends how it is channelled. Typically it is channelled in trading more. Bad idea.
Best thing to consider when in a protracted drawdown and when confidence is low is to take Richard Dennis’ advice: get out, now. Work harder by spending more time analyzing your past trades, see where you have deviated from your plan, and go exercise to get rid of the stress and frustration of a couple of days. Spend time with family to put things back into perspective. It’s just money.
Come back with a fresh outlook and start over, with more patience and more focus. Give yourself a chance to play again by not over-trading and preserving your capital.
To show you how difficult this is, check out my own trade blotter. I can’t even take my own advice. It’s super-hard to stay out of the market when you want to make up for the losses so badly… I still trade Yen and Palladium in exactly the wrong ways I mentioned before: tighter stops with small positions…