How to handle bad days Stock Trading

Updated: Jun 22

Controlling your emotions in the markets.

How to handle bad days in trading

Trading is a roller coaster of emotions. Good, profitable periods make you feel smart and pompous while bad days suck the motivation out of you.

Such emotions are more prominent especially when you are a beginner trader. It’s not only the remorse of losing money in bad days, but also about what follows next when you try to recoup the lost money by trading more aggressively.

Most trading careers end when traders do revenge trading and lose their shirts.

When traders have large drawdowns, they first refuse to cut losses and wish for the markets to give their money back.

When drawdowns reach extremely painful levels, they decide to throw in the towel, sometimes right at the key turning points.

While they are in red, they are so engrossed in despair that they let newer trading opportunities pass by, missing the chance to recoup their money and their confidence back.

So, how should traders deal with bad days and avoid ending their trading careers prematurely?

Here are a few ways to prepare yourself for losses and come out of them like a pro.

Know that trading is non-linear

As many successful traders say, “the first loss in trading is your best loss.” If you lose early on in your trading career, you know what to expect from the market.

You would understand that trading won’t deliver profit all the time and it’s not easy.

I constantly update my trading results in our group to ensure the longer term perspective is always in mind:

Can you see that even though the profit is considerable, it is not linear, periods of drawdown or stagnation are often in the trend.

The prime benefit of this realisation is that you become aware of the perils of trading and safeguarding your capital becomes your primary trading objective. It’s the best thing for your novice to great journey, because great traders always think risk first.

Also, the money in trading is made in spurts and there are times when you should just hide and do nothing. Trying to be a hero in bad markets is a bad strategy. Realizing this early on gives you a great survival edge.

Sometimes you just have to survive and wait for the conditions to improve.

Follow rules

Setting the expectations right is crucial but it won’t move the needle much unless you have a rule book and a plan to deal with whatever the markets are throwing at you. It boils down to timely and disciplined execution.

I have a trading expectation video here for those interested: