It happens to every trader eventually, no matter how skillful. For you, it could happen tomorrow, or it could happen ten years from now. It might already have happened. You’re going along, trading based off your system, and everything seems to be fine. And then one day you lose a trade. Shrugging, you chalk it up to chance and press on. Every now and again, you’re going to lose one or two or three, right? Then you lose a couple more. Hoping this is just the typical losing streak that happens about once a year, you continue trading. And then you lose another trade, and another. Now you’re starting to notice some serious drawdown in your account. And then you are forced to face facts: Something has broken.
Questions race through your mind. “Is it me? Is it something about me that’s changed? Or is it my trading system? Is it mysteriously broken? Why won’t it work? Are my days of trading successfully over? Is my business a failure?”
Some of these questions are actually quite sensible. You should be trying to track down the exact cause of the failure. You should not however start worrying that your days in binary options are at an end and that you’ll have to return to a 9 to 5 job at the office, and that your life is over as you know it. This really does happen to every trader eventually. And the majority are able to move on and get things working again. Those that don’t usually fail because they give up, not because they cannot get better.
Here are 8 steps to follow to mend a broken trading plan. Also have a look at 7 common trading mistakes for more great tips.
- Check your trading rules carefully. Are you following them?
The first thing to look for is to see whether you have made a change in the way you trade which is taking you away from the rules set by your system and your plan. You should read your trading rules every day before you sit down to trade, and making a checklist can help prevent you from deviating. That does not mean it doesn’t happen now and again. See if you have slowly been drifting away from following your plan. If so, that may explain why you have been losing trades. Get back to following your plan properly and see if that fixes your problem.
- Are others who are using your system having the same problems?
If you are using a trading method which is very common, check online to see if other traders using a similar system are having problems or not. If they are, there may be something that has changed about the market conditions which is giving more than one of you grief. If not, the answer probably still has something to do with you and your trading or the specifics of your system (which may be similar, but not identical, to someone else’s system). If the way you trade takes you into dangerous market conditions other traders would naturally avoid, though, it could still have something to do with changes in the market.
- What is the market situation?
Look back over your recent charts. What kind of market are you trying to trade in? Is it ranging or trending? Is it very choppy? Is it choppier than conditions you would normally trade in? Have you been getting caught by a lot of whipsaws? It is very common for traders to pay close attention to their trading rules, but entirely ignore the context of their trades. This is a huge mistake and can easily result in strings of seemingly inexplicable losses. Do not trade in choppy markets unless your system allows you to do so profitably.
- Check if you are trading close to pivot zones.
Another aspect of context you may be ignoring is support and resistance, as well as “pivot areas” formed by both. If you use these regions to your advantage, they can help you to protect yourself from losses. But if you ignore them and place your trades randomly in juxtaposition to them, they can actually cost you money. Look for support and resistance areas if you usually don’t. Have you been placing “High” trades right in front of areas of major resistance? If so, you can see how this could cost you money, even if the setup looked fine otherwise.
- Ask yourself if you are taking only the best setups.
When you look for a trade setup, what are you searching for? Do you regularly find yourself compromising on your criteria because you feel the need to make more trades? This kind of behavior is called “overtrading,” and is a common reason that traders lose money. You may not even realize you are doing it until you start thinking about it. Go through your trades (starting back before you had the problem) and mark them with letter grades according to their quality. If most of your previous (winning) trades were marked “A,” and increasing numbers of trades are marked with “B” or even “C,” you may have your answer.
- Were you winning by chance before?
Sometimes you discover that your previous wins were the anomaly, and not your current success. Analyze your system and learn how it works, if you have not done so already. Numerous traders use systems they found somewhere, but do not actually understand. If you do not understand your system, then by definition you are clueless as to why it does or does not work. And that means you are helpless to prevent losses until you do. Figure out why your system worked before, and that will help you to see why it is not working now. You may even discover your previous wins were the result of luck. In that case, it may be time to replace your system. Or you might have the beginnings of a good system, and you may simply need to revise the one you have until it makes sense.
- Ask for help.
If you are still stuck, ask for help from members of the binary options community. Start with people who trade a similar system if you can find them. Many community members are more than happy to lend a hand when someone is in need of assistance because they know that what comes around goes around. This can be one of the best things you can do to try and get back to winning faster. Real leverage in trading involves learning from the time and experience of others when you have the chance. That is more powerful than any bonus.
- Test before going live again.
Once you figure out what is causing the problem with your trading, you will probably be very excited to start up again. But it is very important that you go through another brief demo testing phase before you do go live. Why? You need to make sure that you are right by testing what you have learned in real time with current market conditions. It also is important to ensure that you are emotionally level before you trade live again, and that neither excitement nor trepidation are standing in your way.
There are few situations in trading which are more frightening than having something which worked before abruptly stop working. But by following these steps, you can start honing in on the problem and solving it, instead of fretting that your career as a trader is over. If you were trading successfully before, you probably had a good thing going on, and even if you were relying partially on luck, odds are you still brought some material to the table which you can use in the future. Make improvements to your system and your trading plan as needed, and get back to binary options success.
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