Photo-finish Losing: The 3R's to pull you through

There are 52 weeks in a year. At its maximum, there are 5 trading days in each week. If we compute that, we have about 260 days of trading, give or take. Given a margin of error of about 10%, we narrow the trading days to about 234 days in a year.

When you live your stock market investing life as a trader, there are about 234 days of profit making, or worse, loss making opportunities. It would be great if we could make a profit EVERY trading day. But alas, we are humans -- to err is human, to forgive oneself, divinely important.

During the times that we are on a winning streak, we get blinded from reality.

We feel over-confident, as if we're the bull of the bulls. "Everything will go up", we tell ourselves.

We become riskier traders. "On to the next basura stock!", we shout haughtily.

We let our greed and pride take over. "How can I have made a mistake? I was supposed to make a ceiling price profit today!"

And then soon enough, reality checks in like an impatient tourist at a hotel.

Your three day winning streak snaps and the gains you had, lost to Mr. Losses.

Sounds familiar?

I've been in that same situation before. Oftentimes, due to greed.

If the need for speed is for cars, it's the need for greed in the stock market.

Money doesn't grow on trees, but it grows (and disappears) in the stock market. And when that happens, it's so easy to forget that most things are temporal - profits, winning streaks, and most important - losing streaks.

Alfred Pennyworth told Bruce Wayne in the movie "Batman Begins" - "Why do we fall, sir? So that we might better learn to pick ourselves up. "

You can look at losing in so many ways, but the best thing to look at is this - it's a learning, and very humbling experience. And in my experience as a trader, I've learned that it's not easy to recover your losses, and more importantly, recovering yourself.

Imagine yourself as a stock gaining selling momentum, you just don't know how low you're going to get. And you know funny and corny as it may sound, you'll find your support eventually. In the company of friends, and most especially fellow traders. But that's not enough. They're not with you always.

When you're left alone, and starting to feel unsure about yourself, you begin to realize that your emotions have already started to shake your once formidable confidence. Fear and uncertainty creeps in. You start to doubt yourself - what to buy, reading the charts right, nerve wracking decision making.

When that happens, I would advise you to do my 3 R's to start gaining confidence, and momentum for yourself -

Retreat

Mr. Danny Go, one of our technical analysis instructors from Absolute Traders, said it best. "When you're on a losing streak, stop whatever it is you're doing!"

Sometimes the obvious things aren't so obvious. When we're on a losing streak, it's best to stop the bleeding by stopping the trading.

It pays to retreat from the market. Give time to analyze your recent trading mistakes. No one knows you better than yourself.

Take a breather. It could span from a few days to weeks, maybe even months!

A successful trader in the US (name to follow) had to stop trading when he realized the emotional burden of his divorce settlement was hurting his trading decision.

Let your pride, and greed, take a back seat. In the long run, you'll fare better.

Recharge

To do that, you have to sanitize yourself.

Stay away from reading, seeing or hearing any news about the market.

There's no better way to do that than to go on a vacation. Do the things that you have forgotten to do because you've invested too much time in the stock market.

When you've feel rested, and know that you've regained your form, you can do the next step.

Re-enter

Now, when you re-enter the market, you carry with you a fresh perspective. Your mind becomes sharper, your eyes become keen to area patterns and indicators. Your gut feel kicks into full gear. A rush of trading adrenalin pumps into your veins. And before you know it, you'll be having your win streak again.

So remember, the next time you fall into that losing streak, hit the brakes. You can't charge through a brick wall without figuring out how.

Good luck traders!