My Advice To A Failing Trader

A veteran trader recently reached out to me.  Twenty years ago he started out as a lowly floor runner, but through sheer guts and determination worked his way up to being a “local” in the pits.  After a number of years of success there, he was able to make the transition to trading from home, which he has been doing for the last ten years.

In 2008 he had it all, the house, the fancy cars, and the addition of his first-born child. Then he had a spectacular suicide trade and just like that, all the “stuff” his twenty years of successful trading had brought him was gone.

In his own words he told me that he is “still trading on an intravenous drip, but have done nothing for 4 years but run from the ghost of 2008.”

What he wanted to know from me was if I had any advice on how to exercise those “ghosts” and get back to the business of being a successful trader.  Here is an expanded version of what I told him, and it goes for anyone that is currently having a tough time in the markets.

As counter-intuitive as it might sound, I would start to get involved in helping/mentoring new traders, and here’s why….

First off, it’s a good thing to do. It makes you feel good about yourself when you are helping others. I bet you have a ton of knowledge that beginning traders would love to have access to.

The other great thing about helping mentor others to trade is it forces you to repeatedly talk about and illustrate what the most important things are for successful trading.  Chances are you may have forgotten some of those things and this process will help reinforce and re-internalize them yourself.  See my post “Stops And Smiles Should Be Automatic.”

Next, start a blog. Crazy huh? What sort of friggin’ idiot blogs about the markets, right?

But writing stuff down is cathartic. It allows you to crystallize what went wrong (or is still going wrong) with your trading, identify it, and then leave it behind.  You don’t even have to have to make your blog public, it can just be an online journal if you want.  It’s the process that matters.

Next, give yourself a break. Everybody screws up. Take some time each day to enjoy the little pleasures of life. A nice beer, good food, a cigar, a cool breeze on a beautiful day, etc.

Sounds simplistic but I can tell you from experience, when traders are having a losing streak, especially an extended losing streak, their world tends to become ONLY about the markets.  That is a great way to lose perspective and without perspective in your trading you are more apt to continue your money losing ways.

Next, if you aren’t currently doing something physical everyday, then start.  Go to the gym.  Rollerblade at the park.  Ride your bike around the block 10 times. You are starting the process of mentally getting back in “fighting shape,” make sure your body is in that same shape as well.

Finally, look at your child. He/she doesn’t care if you are a good trader or bad. Rich or poor. Cool or a nerd. Your kid just needs you to be the best dad you can be. That is THE MOST IMPORTANT job you will ever have. Get into it. Have fun with it. Trust me, it will be the best thing you ever do.

It’s hard to take a knock down like you had, but you’ve stayed in the game for this long which means that it isn’t your track record of winning that is the outlier, it’s your recent losses that are. Learn from your mistakes, don’t repeat them, and re-build.  If you do, it will get better.

Hope this helps.

What do I know about giving advice?  A lot of people have told me they have learned from things I have written on this blog, and if that is the case, then I am happy about it, but I don’t consider this a “self-improvement” blog.  There are others who do that.

I generally think that the advice we give to people is the same advice we would give ourselves.  So this is in fact what I would tell myself if I was in the same situation. Hope it helps.

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15 Responses

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  2. It’s so easy to lose sight of the big picture when you’re in a trading slump. I think it’s key for traders to have a set “routine” they go through when they can’t get trading difficulties off their mind. For me, I go to the gym and watch funny TV shows. Others I know play video games or read.

    Your friend might also benefit from a backer/prop firm as well. If they’re petrified of the ghost of 2008 and a future suicide trade, maybe it’ll be worth giving up a percentage of profits for protection on the downside?

  3. After many year of being in business for myself and owning businesses what you said here couldn t of been said better. Not just to those struggling ( been there many a times…including now) but those doing well too. Any advice for a stuggling novice that is having trouble with trading and with this phone gadget?

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  5. great post.

    I would like to emphasize the importance of mental state. a failing trader asking for advice is clearly not over his losses or is in the process of getting over it. mental state is very important while trading….actually its important while doing anything in life. especially since the markets are more often than not driven by different edges of the mental state (greed, euphoria, fear, panic).

    when I am going through bad trades everything in my life suffers. my attitude, my impatience, my relationships…etc. i’ve since learned to take a step back and breathe. this is one of the fundamental aspects of life and surviving. take the time to do the things you love doing and learn how to breathe, observe life around you and be aware of each and every moment in your day. become more mindful and as your mental state improves, so will your trading.

    you become less impulsive, more disciplined and a lot more calmer.

    oh and I completely agree about getting physical exercise…100%

  6. Great post. But as far as mentoring goes, I’d rather train one gifted person than have 100 people I waste my time on. I’ve had a few interns and find that most just don’t want to do the math, and learn to calculate in their heads. But then again I am confused about the markets direction more often than not. The best mentoring I ever gave involved people to find the unluckiest SOB they could find, real coolers. Their bad juju will rub off on you if you associate with them for more than a short period of time, so when you see thm losing, fade them hard.

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