One of our members who is apart of the one on one mentorship program recently ran into a period of draw down and was struggling to find out what could be causing this. All his trades for the most part were inline with his trading plan but his execution and management was were the issued was at. After some time of going through his journal and reviewing his trades it was clear what the problem was.
He was burnt out and it was affecting his trading. Thankfully he kept a very detailed journal and the majority of his losing trades happened when he was tired or couldn't focus. After speaking with him on what could be causing this we came to the conclusion that he should only trade 4 out of 5 days of the week.
The majority of his losses happened on either Thursday or Friday of this draw down period. What he didn't realize is how mentally draining trading can be. Traders are required to be at the top of the game when ever they are in front of the computer.
Trading can be compared to any professional sport. You wouldn't walk into the super bowl feeling burnt out and tired and expect to play the best game of your life would you? I hope not, the same goes for trading.
One of the hardest things for traders to do is to not trade. It might sound silly but it is very common problem all traders run into. Traders need to gain the ability to turn it off and turn it on, when your tired or burnt out its time to turn it off ASAP.
The best way to do this is a simple morning check list that goes over where your mental state is currently at. If your tired or lacking the ability to focus then simply turn the charts off and go work on something else or take the day and relax. There is no reason to risk hard earned money when you are not at the top of your game. If anything you will end up making/saving money by not trading when you are not 100%.
One of the exercises we have our traders do is keep a constant check list of there mental well being during the trading day. It extremely simple to set up, set an alarm for every 15-30 minutes and have a check list of whats going on in your mind. Are you tired,are you thinking clear, do you have FOMO, are you revenge trading, are you stressed? These are just a few of the questions you can/should ask yourself during the session. If you selected yes for any of the negative emotions then you know its either time for a break or time to shut things down.
These simple exercises will help you over come these issues and help you gain control of yourself. Trading is a very unique job where you need to be able to manage yourself and your emotions. At times you will need to be the employee and at times you will need to be the manager and "discipline" yourself for breaking rules. Once you master the ability to do both of these your trading career and life will most likely make a turn for the better.