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So... I had a bad week, to say the least. I had 5 consecutive read days. The strategy has been working for 200 trades, so far so it is pretty solid. However, this week, not sure if this is normal, although there are still winning trades, the losing trades just happen more often, so I ended up with 5 red days.
Has this happened to anyone before? How do I handle this? (both psychologically and technical sides)
I start by pining down what was different? Market conditions like influence of news, volatility, change in correlated market or ratings etc
Then I assess if my strategy needs the change or me, meaning while strategy is always evolving as you learn and get used to it, it is also true that you shouldn't try to fix whats not really broken too much. If problem can be solved by other things like leaving market alone when those "different" conditions appear I would do that.
Then there is part where you need to assess if it was you who was different, it can be complicated matter, most ppl don't really assess themselves honestly. So better to start a trading journal or something similar and get different eyeballs into your trades, maybe they will point out something
Answer to your question can't be objective without that, it will always be in general advice unless you show ppl your trades and ask for critique.
Since you mention "strategy," is this an automated strategy, or is it manual trading?
If automated, then the human element is not the problem, so that gives you one direction to look for the answer: something changed in the market and your strategy didn't match market action any more. See if you can diagnose what it is, and then see if you think it's a significant change or just a blip. But that would be the question.
If manual, then you have the human element as well as the "market may have changed" element. See what is different in what you did, as well as how well the method matched the market.
As @LastDino mentioned, starting a trading journal here on this forum may help you, because: (1) someone else can give you some feedback, and (2) if you can clearly explain to others what went on, you can better understand it yourself; if you can't explain it to others, then you probably don't understand it yourself yet, either.
If you decide to start a journal, use the "Trading Journals" link on the forum main page. You can also go there to take a look at other journals, and to see if you think this is something you would benefit from doing.
And don't worry about how it will be received or how it will look. People will want to be helpful, you just will need to give them something to help you with.
Everyone goes through this kind of thing at some time or another. Read a lot of stuff here and you will see how widespread it is, and also how others have dealt with it.
Good luck. Try the journal idea. You may like it.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
So this is the first ever 200 trades of your current trading strategy? If so, then it's at least maybe a first test of your overall system's resiliency, incl. trade management. As mentioned, just some general comments since we don't know your particular trades. You probably heard this suggestion somewhere before, during a rough patch, you could trade with less more comfortable size, until the patch ends, then you can look back and see how the markets were different to your strategy if at all.
I also felt the markets had been wierd the last week and few days, kind of sluggish and feinting more than usual. (I had a losing session and also had to take smaller profits.) Maybe because it's reached another peak and in general long term consolidation before it decides it wants to break out higher or lower again.
Bad days, bad weeks or to some extent bad months happen to every trader at some point. A few weeks ago, nothing was working for me and I had my first losing week since week 07 of this year. In the middle of that rough week I had got myself into quite the drawdown. I managed to recover it in part, but it was still a losing week.
The most important thing is how you deal with it. Over the last decade I have earned myself a black heart. I am not a completely emotionless trader, but I have got to the point where I understand that these things happen and I get nonplussed about them for the most part.
I figured that the underlying structure of the market had changed and I think it is still evolving. The weeks since have been somewhat a mixed bag, profitable but no knock outs.
In a readers digest format, I developed my system into a semi-automated strategy (it enters the trades and I manage them) with some machine learning component attached to it. The idea of the ML part was to look at the underlying structure of the market and change accordingly. The problem with this is the ML is like an oil tanker, it can't steer on a dime and takes a little time to adapt.
Apart from a couple of Hail Mary trades where I entered a trade and just let the market run to capture a bigger move to ease my large drawdown, I am trading my system/setup in exactly the same way as before, and that is what you have to do. If you have empirical evidence that your setup/strategy works then there is no reason to trade differently.
However, like any strategy, unless they have a component in them that can adapt to the structure of the market, it is still searching for said market structure that made it profitable in the first place, but the market isn't giving it to you. Many successful strategies are only "switched on" when the market conditions are ripe for that particular strategy. A strategy that is designed for trends will suck in a range bound market and vice versa.
So can you isolate the market conditions in which your strategy was profitable? What kind of day types were they etc.
And I'll be honest, 200 trades is a drop in the bucket and probably not enough to assess the success or failure of a strategy.
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- Trade what you see. Invest in what you believe -
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Reminds me of Crocodile Dundee: Thats not a knife.
I never lost 5 days in a row over a plus 40 year time span.
However for the first 49 months of trading, I never had a winning month.
That is a losing streak--49 months in a row red.
After I made my first profitable month I never had a losing month again.
It just took me a hell of a long time to find out what works. Most of the crap that some con-man sells for $1,000 does not work. Free advice did not work. I had to learn from professional traders.
Luckily I was wealthy to begin with and could finance my learning curve.
I equate it to 48 months in a row in college I never made any money. Had to graduate then get a job.
