One of the most common problems is that people are quitting their trades earlier than they

originally planned. For example, their Profit Target is 10 pips, but when they are 8-9 pips in open
profit, they close their position because they are afraid that the price will turn. So, instead of
taking full 10 pip profit, they take “at least something“. I was also like this, so I know what I am
talking about. There is nothing rational behind such behavior. People are just afraid. The strongest
emotions traders face are fear and greed.

The fix to this is to use a trading journal and start doing a simple statistics of your trades. You do
this in order to collect some hard data. Write down what your actual result was and in another
column write what your result would be if you stuck to the rules. After some time you will see
a big difference between the two. Statistics and hard data that you collected will show you
something that you won’t be able to deny. Whenever you will be tempted to break or bend your
rules again – just remember the statistics that you did. You will know that statistically speaking –
breaking a rule hurts you and you won’t do it ever again.

Cycle of doom and despair

I know that Cycle of doom and despair sound silly. I wanted to change the name of this chapter,
but I decided I won’t because it just fits.

What I call the Cycle of doom and despair is a phenomenon and a reason why so many traders
fail. The cycle starts when you as a trader develop or learn a relatively good trading strategy. You
trade with it but before you give it enough time to master, you start tweaking it and changing
little aspects of it or you start to look for another strategy, which you think would work better. In
the end, you are caught in a circle where you only look for new strategies, but you don't spend
enough time to master any of them. This way you are always losing money and always looking for
something different. This is the Cycle of doom and despair.

The only way out is to stop looking for new strategies. Find one that you believe in, one which
makes the most sense to you and which feels most comfortable. Then give it enough time. Don't
be impatient. Trading isn't easy. If it were, everybody would be doing it.

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One thing can be a bit confusing so I would like to make it clear. Traders should try different
trading styles to see what fits them best, what feels most natural and what they are most
comfortable doing. However, they should not jump from strategy to strategy. This would be for
example jumping between ten intraday strategies – that would be the Cycle of doom and despair
which makes traders fail.

How to handle winning

Congratulations if after all the hard work your strategy is successful and your equity curve goes
upwards! If you want to maintain being profitable, you need to keep respecting the markets and
you need to stay the hardworking and humble person.

Usually, people who start winning start to feel like they are invincible, they start to risk much
more money, they enter more risky trades, they don't do their market analysis and trading
preparation as properly as before, they start to bend rules, etc... Before they know it, they start
losing money quickly and they are back where they began, or worse – they find themselves in
enormous drawdown.

People usually take a break after such experience and after few weeks or months, they start anew.
Again, they start humble and hard working. When they start being successful and profitable, they
repeat their mistakes and they become careless and they start feeling invincible again. Then they

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fail. This cycle repeats until the person quits trading, often blaming markets or the strategy for
not being consistent.

The trick is to stay humble and hard working all the time. When you have a winning streak or
when your trading is going really well, then you need to be most vigilant and extra careful. Do
your analysis properly, don't overtrade and most importantly, don't start trading with too big
volumes! You may raise your trading volumes a little bit, but you need to do it little by little. When
a losing streak hits you (this will happen sooner or later), you need to stay in the game and survive.
Not to blow your account just because you have just doubled your positions because you felt
invincible.

How to handle losing

A really important and helpful thing in trading is to have statistics of your strategy. If you are
starting with a new strategy you can use statistics from your backtests and then start adding
statistics from your real trading to it. Statistics based on data from your real trading is much more
valuable than statistics based on backtests.

How to deal with a standard drawdown

When you are losing, it best to take a look at your own statistical data and see if such a scenario
has happened before. You need to see if this is still "normal" or if something bad is really going
on. If you are just in a regular drawdown, then seeing the statistics will reassure you, because you
will see that this is still normal, that it happened before and that the strategy will most likely work
just fine again. In this case, I suggest you just continue with your trading as usual and try not to
freak out too much. Remember that all strategies have their ups and downs. It is important that
you do not change your strategy nor your money management.

How to deal with an excessive drawdown

Excessive drawdown is when your current drawdown is bigger than any drawdown your strategy
ever made. I don’t recommend any extra measures until your current drawdown is more than 30-
50% of your biggest drawdown. So, for example, if your biggest drawdown was 20%, then you
start taking action when you are 26–30% down.

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When you are in such a drawdown, it is natural that you are afraid to take more trades. You feel
like your strategy has stopped working and the more you trade, the more it hurts. When this
happens, I do not advise you to stop trading. You would probably miss a winning streak (Murphy‘s
law works really well in trading). Instead, I recommend that you continue trading, only with
smaller positions (for example half positions). With smaller positions, you won't be paralyzed with
fear of losing another trade and you will be able to think clearly again. You will regain faith in your
strategy and you will be slowly digging out of your losses. It won't be as fast as with full positions
but you will be making a progress. You can start using your standard position size again when you
dig out at least halfway through the drawdown and when you feel confident enough to trade with
standard positions again.

How to get back on the right track

Sometimes what was working before seems not to work anymore. Instead of jumping to another
strategy, I suggest that you try to find what you were doing differently back then when your
trading was just fine and your strategy was working.

The best thing you can do is to take a screenshot after every trade you take and add a brief
commentary to it. Taking such a screenshot literally takes 1 minute and it can save your trading

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career! Some people do only screenshots of their bad trades but instead of focusing only on the
negative, you also need to see what you were doing right and what was working. So, when you
are struggling, go back to your screenshots and go through them. See what trades you were taking
when everything worked just fine. Now you only need to trade the same way as you did before
when everything was fine. This will help you get back on the track. It is like when your Windows
crashes. It loads a backup of the last configuration that worked. You should do the same.

Another thing you can do is to go through your statistics and see what trading instruments work
with your strategy the best. If we are talking forex, then it is usually the EUR/USD that
outperforms the other pairs. So, if you are struggling, I suggest that you start trading only the
instrument that works the best for you. Don’t trade anything else until you regain a major part of
your lost capital back and until you feel comfortable enough to start trading with the other, worse
performing instruments again.

I hope that you have realized how enormously a good statistics can help you. If you are struggling
and you don’t have a solid statistics with screenshots to lean to, you are left clueless and helpless.
You probably won’t survive your first drawdown. So, if you are not writing down your trades or
doing screenshots of your trades, then start now! One day you will need it and it will help you
tremendously.

Th last thing I would like to mention here is that you don’t need to go through your statistics and
screenshots only when you are in trouble. In fact, I suggest you do it regularly. Especially going
through the screenshots is really helpful, educational and it will help you move forward in your
trading no matter how good you are. Sometimes, it is really interesting to see what trades you
were taking one or two years back. You will realize the progress you made since then and it will
make you feel really good and motivated.

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