Kill Your Losing Streaks

Imagine a small losing streak of just 5 trades risking 1% on each; it would cost you nearly 5% of your account. Think about that for a second, 5% of your account wiped out, by just a handful of bad trades. If you’re a trader, that should scare you. Chart showing large Forex losing streak

For a trader who has been trading for years, small losing streaks are easy to deal with. However, for newbies, these losing streaks can have a detrimental impact on trading psychology.

New traders tend to let emotions get in the way of trading. If you are a newbie, your money management plan might say “I will risk 1% per trade”, but after a losing streak you may get angry and risk more to win back your losses. You would not be the first newbie to make that kind of mistake.

It is better to simply avoid painful losing streaks while learning Forex.

Lessen the impact of losing streaks

So, how can you kill off your losing streaks before they destroy your trading psychology?

It’s easy, if you lose three trades in a row, close down your platform, and take a few days off trading. This allows you to:

Kill the losing streak before it gets bad. The longer a losing streak runs, the bigger the impact on your trading psychology. Killing your losing streak before it starts to mess with your head is always a good idea.
Take a break and clear your head. Trading day in, day out, can get pretty stressful. This is especially true if you lose a few trades in a row. Taking a break will allow you to clear your head and calm down. Coming back to Forex calm and relaxed will help you break out of your losing streak.
Preserve your capital, and prevent massive draw downs. As I said above, new traders usually let emotions get in the way. A losing streak, plus some emotional trading, usually leads to massive draw down. So, taking a break allows you to avoid destroying your account.

How This Rule Has Helped Me

These days, if I lose three trades in a row, I do not mind. I know that losing trades is part of trading Forex. However, when I was a newbie, I blew two accounts due to losing streaks. On my third account, I started using this rule, and I saved myself from a third margin call.

If I hadn’t followed this rule, I would not be a trader today. I would have margin called several accounts, and who knows where I would be?

This is something you should seriously consider adopting into your trading.

Are You Going To Use This Rule?

Are you going to use this rule in your trading? Leave a comment and discuss it, I would like to see what everybody thinks about this.

423 comments

Chad

November 6, 2008

I also blew 2 accounts before becoming disciplined enough to stick to my trading rules. I guess that’s the price of a forex education.

The “3-losses in a row” is priceless. I use it.

Once again Nick, I really appreciate your posts on the psychology of trading. To me, that is the hardest part of learning to trade.

One thing I have discovered is that when I am disciplined in other aspects of my life, it becomes easier to be disciplined in my trading. Exercise, eating habits, etc. affect my trading discipline.

Thanks again,
Chad

Clayboy

November 6, 2008

Sounds like sound advice to me.

Clayboy

jmar

November 6, 2008

Good post. I do have this problem at times. I also have blown 2 accounts. About the time I get it going up I regress. Mentally is tough to make the hard decisions. Thank you for your incite. Jim

Tim

November 6, 2008

How did you know what just happened to me. Im going on one week vacation to conserve the remaining funds.
All the same Thanks, Nick,

JimmyR

November 6, 2008

Ditto to what Tim said. We know it, but we like to fight back the market. I took a big risk today and lost. Serves me right for ignoring money management schooling. :-(

Wombles

November 6, 2008

Definitely a must rule and one I now implement rigidly. In fact, it is probably one of two trading rules I follow rigidly (the other is my money management).

Its probably slightly easier to implement when you are trading larger time frames with a higher win loss (w/l) ratio than trading smaller time frames with lower w/l i.e. using 4hrs when expecting, say, 80% w/l and using 1 min when expecting 50% w/l. With the latter you may well be expecting to lose more than 3 in a row.

Cheers Nick.

Arthur

November 6, 2008

I was thinking about taking a break after 2 losing trades in a row…..
Is that overly conservative?
Well i guess only i can answer that….but certainly 3 is a good number

Bap

November 6, 2008

For about 6 months now (have done this twice in 6 months) If I have 2 bad trades in a row. My third trade will be 1/2 of 1% instead of 2%. If that one is a looser I take the rest of the week off. If I have three good trades in a row I go back up to 2%. Seems to work for me.

ZapFX

November 6, 2008

Mind blowing article Nick. I never considered this but it seems like a top idea. I will be incorporating this into my trading. Thank you for all you do for us

Troyyy

November 6, 2008

Thumbs up!

Snark-Pod

November 6, 2008

Nick thank you again for everything you do. This blog gets better and better every day!

Ibrahim

November 6, 2008

Can help me find method which make profit consistently?

FXGreyNite

November 6, 2008

Bravo, Bravo.

Da-Pipanator

November 6, 2008

Thanks for this article Nick it is a big help

Steffan

November 6, 2008

Nick you are my light at the end of a dark tunnel

MagZ

November 7, 2008

How the heck do you know so much if you are only 22 years old? If I knew what you know when i was 22 I would rule the world. Thanks Nick for your tireless efforts

I want you to know that they are not wasted. You have helped turn my trading around. I turned a $500 account into $4,372 since I found your site.

Garry

November 7, 2008

Nice one nick.

blasé-tyranny@tiscali.co.uk

November 7, 2008

I have blow three accounts already so this advice is much appreciated thanks a million NickB!

LearnFX

November 7, 2008

Who taught you Forex Nick?

Cullen

November 7, 2008

Thanks.

TwoEyedCyclops

November 7, 2008

Much has changed in the two odd months I haven’t seen this site. Great to see you improving this site Nick. The content right now is jaw droopingly good.

Thank you for this article.

R.L. Myers

November 7, 2008

This is a real slap in the face. I think this rule is what I have been lacking all this time. I am going to use this rule as of Monday and kick Mr. Losing Streak’s ass.

I have to congratulate your tireless effort to help us newbies. I for one am in your debt.

GlassHouse

November 7, 2008

I have blow three accounts already so this advice is much appreciated thanks a million NickB!

Marian

November 7, 2008

Excellent post, like always, Nick. I am at my first live account and I blew 20% of it in a loosing streak, just as you described it. I kept trading in anger, raising the lot numbers, to get my pips back faster. But I kept loosing them at an exponential rate. So after loosing 20% I started getting back to planet earth and realised I don’t own yhe market. I can’ take revenge on the market. The market always wins, no matter if I win or not. Do not underestimate the market! It’s just like a box match. Hit the oponemt once, twice, third time, then you think he’s at the palm of your hands, you underestimate him. Then he kicks your face and knocks you out. That’s the forex market. Your advice should be written over our monitors with a marker.

Thanks again, Nick!

luis

November 7, 2008

Thanks for the hard work and time you spend trying to make all the readers better traders

Marian

November 7, 2008

Hi, Nick,

I just realised something after looking at my trades analyser. Even though I lost 20% of my account since I started trading, I have an average win rate of 65%. Still, I am in loss. That must be because of poor money management. I loose more pips when I loose a trade than I win when I win a trade. Maybe I should tighten my stop loss?

Thank you

PS: Since I learned about your method, I have a win rate of 75%, turning to 80%. So thank you, you are a life saver!

NickB

November 7, 2008

@Marian: Hey Marian

It’s difficult to say…. if you can answer the questions below maybe I can help:

How much is your stop in comparison to your target?
Do you trade a consistent amount of lots one each trade?
Do you have consistent stops and targets?
Do you often close out before your target is met?

NickB

November 7, 2008

@LearnFX: I am self-taught. I never had a mentor or read a Forex book. I learnt to trade by looking at the charts.

NickB

November 7, 2008

@Bap: Great, that’s a little more conservative but still good!

NickB

November 7, 2008

@Tim: Looks like I posted this one a week too late. Hope the vacation helps and you grab some pips on your return.

Marian

November 7, 2008

Nick, I usually use the same stop loss as my take profit target. But yes, I was in a loosing streak and increased the number of lots, so that was a very bad idea that cost me a lot. And yes, I sometimes close before the target is met :(

Seems I have to work more on auto-control, right? :)

Thanks again!

Marian

November 7, 2008

I meant self-control, sorry

Wombles

November 10, 2008

Hey Nick,
Thanks for sharing the fact that you blew two accounts early on in your trading account.
Just wondering whether you were trading your method (or a version of it) during this period? I noted that you used to take 1 min scalp trades (YouTube video) – do you still take the occasional 1 min scalp trade, and if not, why not?

Cheers

izzi2

January 26, 2009

Nick you are very correct with what you are saying.

When I heard of the forex biz for the first time in my life,
with that excitment of making so much money, I quickly jumped into
forex without proper traning and discipline, I lose all that.

Again, I fund the account for the second time and loss it and
thereafter now I met with Nick B site where I’m learning how to
analysis chart with proper discipline.

Nick, I give God the glory, you are God send to us.

Thanks a million.

Izzi2

FXGirl

January 31, 2009

Nick: Thanks for sharing that you blew up two accounts. I refunded twice too – all in a trader’s learning curve.

I agree that if you are too emotional, you need to leave the computer and do something else for a while. But I have a slightly different take on your 3 losing trade rule.

I think that there are three factors to consider. First, if you have a trading plan that produces a certain profit/loss ratio (and here I’m talking about how much money you make verses how much you lose, not pips or whether the trade is a winner or a loser), if you don’t take EVERY trade setup that meets your criteria, you change your profit/loss ratio – it becomes less.

Next, it you change your lot size (unless that is part of your plan) you also change your profit/loss ratio.

Third, the market moves in cycles. If you have several losses during a consolidation cycle and then quit, you miss the payout cycle and lose your chance to make money – and make up for your losses.

In all the above, I’m assuming that the trader has a trading plan has clear entry and exit rules and money management rules.

Perry

February 1, 2009

Nick I have no doubt that this is great advice for newby traders but I personally feel and know from experience that if you have a robust system, and trade a definite edge that is tried and tested; this could be the absolute worst thing you could do. I say this because drawdown is part of the game and from my experience every time I stop and miss a trade it is the one trade that would have replaced all my previous losses and some.I don’t doubt this depends on your system but I feel without one you are doomed to fail anyway. If I let my emotions control my trading i would not turn a profit. I trade my system religiously and control both my emotions and my risk with proper position sizing and to me THAT is the key to trading.This is just my opinion and think it can’t hurt to look at things from a different perspective.Enjoying your site and keep up the good work.

izzi2

February 2, 2009

Nick, you’re really hitting at the nail.

Thanks a million.

NDUBUISI KEVIN ANYAOGU

February 17, 2009

The rule is worthwhile and it is only newbies that can ignore the warning it comes with. I really enjoy all the good trading tips you discussed so far and will not hesitate to thank you immensely for helping us in knowing what might have taken us yrs to know. Some of what you discussed have happened to me, and i keep on learning.

Thanks and keep your good work.

kevin

angie

February 20, 2009

Dear Nick,

Same thing happen to me twice too…
I blew 100% of my capital in my first trading just in few days.
Then blew 60% of my account on the 2nd trade.
Then I decided on using this rules by stop trading for a few month and back on the demo account.
It works quite well and now my self-confident is back and my trading is getting better and better every day.

angie

February 20, 2009

Thanks a lot, Nick!

Doji

February 28, 2009

Exellent advice Nick. Lucky for me I discovered your site before blowing my account.

Nigel

March 26, 2009

The best advice, like the truth, is usually simple. Thanks!

sagitaire

March 31, 2009

Nick! A well written article with sound advice, which i will heed, religiously, from now on. I have not totally wiped out my 1st account, but I came very close to it. And that was partly through not knowing how to trade, and getting ANGRY at my losses. So now I’m trading my demo account, listening to people such as you and learning the ropes. Only when I’m confident in myself and believe I can control my emotions, will I go back to live trading.

Your articles and teaching methods are, in my opinion, a great booster.

Thanks again.

DheroEmpire

April 17, 2009

Hello Nick, I think you are making a point, I have blown my account like 4 times and the last time, my bank delayed in sending my money by almost 48hours,then I have gotten over the fever almost. Great Idea i think i will take that.
Thanks.

MrCool

April 27, 2009

It’s happened to me… I loss my 8++ USD just because of 1 (one) trade,
why it’s happen.. coz i’m very confidence that market will bounce back.. but actually i’m on my way to collapse… it’s happen to me 2 times… I hope it will not happen to me for the 3rd times. I will use your rule from this time onwards. sorry coz my english is not fluent. I’m still leaning to improve my english,

Ark

June 14, 2009

What you say is so true. The ‘revenge’ emotion must constantly be kept in check. If you let down your guard and try to get back at the market, you’ll get punished for it. Been there…done that! Great article…thank you for the sound advice.

rodin

July 23, 2009

lol…omg…Nick i’m now wiating to open on my forth account do to Revenge trading. Nick I must say thank you for letting me know I’m not alone when it comes to making that mistake ( more then once).

Duncs

September 17, 2009

Spot on Nick you described me to a tee

Chris

November 15, 2009

Nick,,,The best advice, like the truth, is usually simple. My method is simple and I’m doing very good…I hope newbies understand what you are saying, I’ve been trading live over 5 years, by using my simple method you described me..
Keep up the good work Nick..Thanks…

cbkoh

December 28, 2009

Hi Nick, this post is great advice to newbies like me.I for one could validate that ‘trading out of anger’ could easily decimate one’s account. I knew it because it happened to me!In the end, I had to plough in more $$$ to fund my account.Then I came across this site. Humbly I hope that this site could start to educate this “bad student” and let me “pip” back my hard earned $$$…Thanks Nick. This post has really opened my eyes…

amory

September 24, 2010

as a latecomer to this site .. & to Forex .. I would say that I too am greatly impressed by Nick’s no-nonsense advice .. with a slight variation.

when I run into a losing streak .. too often for my liking .. I don’t go away. I go to bed .. most of the best trading hours seem to be around midnight Sydney time (have I got that right Nick?) .. & think about it till falling asleep. Next morning, bingo .. I know where I made my mistake(s) .. or think I know! get up, study the last few transactions & confirm my suspicions. redraft trading plan.

How to do that? well, I see myself primarily as a chartist .. this should make it easy .. crossovers thru signal lines, alerts via arrows, pivots & all the rest of it .. & the most difficult one of all & only rarely if ever open for discussion – the unpredictability of the USDollar .. alright then, what did one overlook or overplay or under-estimate the importance of?

figure that out, make a whole heap of notes, condense them into one simplified worksheet .. & TRY AGAIN!

thanks again, Nick!