The Truth Beneath Winning And Losing Streaks

There is an enormous amount of erroneous stereotypes made up by human beings so they can avoid to take responsibility for the results of their actions.

Neither a series of successful trades in your account, nor a losing spree debacle happen merely "by chance". In trading as well as in life, ups and downs occur in succession, these are unavoidable cycles, and some of them trend a bit before reversing, but the clue to the winning or losing streak is simply your own ability to FOCUS or the lack of it.
Focus will make the difference as when being totally present you are able to detect small changes with more precision (or less delay) and make decisions accordingly, which will then most often be correct, and if wrong you will be able to apply a solution to the problem instantly, and not feel overwhelmed by the whole situation. You will be seeing the whole picture including all the possible outcomes, positive and negative, and your mind will be prepared to react appropriately in front of any of those outcomes as soon as they start occurring.

We usually make bad decisions because of wrong emotions and physical unfitness, but even in the worst physical state, being totally focused can wipe out any tiredness and add renovated strength for the duration of the situation to take care of, like in a state of emergency. Not that I would recommend to do so though, except in very seldom and critical situations should they happen. A balanced lifestyle, with enough room for all your professional and personal activities, is paramount.

But, what is exactly meant by the term “focus”? It is certainly NOT staring endless hours without even blinking looking at charts. The following are the elements that I consider essential to achieve properly focused and successful results in trading.

- Motivation
There is no point in undertaking so many risks and work real hard if those aren’t fueled by a powerful motivation, going way beyond the plain and everyone’s goal of just “making a huge load of money”. In fact, if it’s only greed that moves you to trade, you will have sooner than later to wake up to a not so pleasant reality. Paradoxically, trading can be very easy indeed, if you are deeply interested in all the elements and never stop learning and discovering new approaches and details of your favorite currency pairs and strategies.

- A positive, stable mood
Let’s say you’ve just had a very good trading week and optimized your strategy, your family relationships have improved to a loving, understanding and smooth cooperation, you have reached that total focus state and feel exhilaration as never before. You start making plans so to crank your goals up another notch. Suddenly there is a power outage for several hours, or one of your children starts a heated discussion, or even the neighbour is drilling his apartment’s walls and is making a hell of a noise.

And then you react. Your emotional and mental state blows out as a balloon, and all the nicely up-trending positive attitude is lost, wasted in an useless and negative rejection of the situation, which is nothing more than a reluctance to change immediately, step out of the wonderful and blissful state to take responsibility, make decisions and find an urgent solution for the unpredicted eventuality.

Re-acting is like endlessly repeating the problem while building up tons of negative energy in your body and mind. Never ever allow random circumstances to take hold of and break your precious focused attention. The only positive “reaction” is to acknowledge and accept the situation and TAKE ACTION to make sure there are no obstacles left in the middle of the previous perfectly balanced state.

Learn to recognize the unavoidable pullbacks and set up a “mood switch” so you give back as little fruitful energy as possible when confronted to negative issues.

- Confidence
A well thought-of trading plan and strategy, with all the known and unknown parameters under control, thoroughly tested and confirmed, will bring about a strong confidence which in turn will bring precision to your actions and decisions. When in doubt, simply do not trade. But when you do it, know that you are doing the right thing.

- Alertness
When you trade, do not allow any interruptions and dedicate your attention wholly to the markets. Plan accordingly so every other pending matters of your life have been properly rescheduled, postponed or solved.

Eat well. Sleep well. Breathe fully and take care of your overall health as a fundamental priority. Do not trade when sick or tired. And never attempt to make trading decisions when under the influence of alcohol or other drugs. Some medical treatments can cause foggyness as a side effect, be aware and avoid the charts for a while if this is your case. Come back when you’re well in shape.

Know your charts and indicators well. Know exactly where you are at any moment as to price: understand price action, supply and demand, and technical elements in their relationship with fundamentals. Strive to apprehend the whole picture and how all currencies interact.

- Patience
Learn to wait for the best trading opportunities and refuse to accept any lesser deal unless properly reassessed. Choose your entry price and stick to it. Avoid capitulating because of your anxiousness to have a market exposure running. Take it easy, there are thousands of opportunities every day, and the next day. If what you see on the charts doesn’t match your expectations, leave that computer and go out for a walk, take a nap, fix yourself a meal or just enjoy doing nothing for a while. Sitting still and staring at charts for hours on end is extremely tiring, and fruitless. Overexposure to a single activity brings about exhaustion and frustration, and also can be highly destructive to your discerning ability. Be creative. Depending on your strategy, set up price alerts, or leave limit orders in place and stand up and out of that chair, NOW! Your eyesight and general well-being will improve significantly.

- More Patience.
Read the above paragraph. One more time.

- No particular bias and Timelessness
When it’s time to let go of a trade, let it go. There’s another one waiting for you. Do not cling to a position, nor adopt a fixed directional bias. Every decision should be made as starting it all over again with a fresh point of view. Practice with dedication until you know you are able to move WITH the market and at its pace, not behind, not ahead.
Trade “in the zone”, like floating in a timeless and unlimited, no-directional space. Especially if you are a scalper, know that price can go either direction at any time and it always gives a hint of its next step. Learn to read those hints on the charts and move with price as in a harmonic dance, perfectly synchronized and totally in the present.

- Again, another dose of patience.

- Humbleness, Modesty and Thankfulness
Be grateful for the successful opportunities, and accept both losses and wins with serenity. Your successes are the fruit of your dedication, knowledge, discipline and focus, but remember there will always be another thing to learn, and that circumstances can change at any time. Again, understand the whole picture and know where you are standing on that map. Overconfidence and self-boasting are as dangerous as greed: focus gets then lost in empty daydreaming.

- A specific time frame to respect without any excuses (unless there are still problematic trades to monitor but even here, focus on avoiding as much as possible getting trapped in such a situation): make a daily total break on your trading, with all positions closed. Turn off your computer. Take a new look the next day and start over. Balance your life, work, family, chores and pleasures. Take the time to rest and enjoy.

If you feel depressed, you will tend to let things go wrong and out of proportion. If you aren't properly fed and rested, your mind will be foggy and unless there is a really strong motivation to overcome this, you will let go at the most crucial moment.

Another situation to be wary of is the “too much bliss” times, which can lead to overconfidence and overtrading. Should things go wrong, the emotional drawdown is thereafter much harder to overcome. We get used very quickly to pleasurable situations, and are even quicker to avoid the confrontation with any negative realities. Thus, when everything around has been working as a charm, both in your trading and in your personal life, and you start feeling like floating on a big blue cloud of pure bliss, life is perfect and you are the Master of the markets, your ability to accept and react swiftly to sudden, unexpected and even violent changes will be highly impaired if you are not focused enough, and especially if you lack the “timelessness” factor and the ability to execute absolute and rapid reversals on your points of view.

There is always something that will go wrong and this is a natural condition. Life is nothing else than a game, albeit a serious one. Understand that winning or losing streaks are under your total responsibility. There is no such thing as “chance”… but in turn there are plenty of OPPORTUNITIES: right decisions to make, right attitudes to adopt in front of both favorable and unavoidable events. Learn to recognize the times when you need to squeeze the most out of profitable conditions, and be wise enough to stay away of the markets as much as possible when the tide of your own personal cycles changes. Always save a plan B, C and even D for every situation, in your trading or in life.

Reversion to the mean is to be expected after any peak performance. Make sure that you work in such a way that your own living and trading results start trending and thus the mean keeps climbing every day a little bit higher.