Defining Trading Rut
‘Trading Rut’ is basically a period of time for a trader where he/ she faces losses one after the other constantly, and is not able to get back into a profitable situation. For some people, the string of losses sometimes becomes so bad that they are unable to recover from it for a really long time. Others may be able to identify the causes behind the rut and work their way back into the game.
Why does it happen?
Nobody likes accumulating losses, so it’s obvious that when trading rut happens, something somewhere is going wrong. Here is a list of possible reasons that you can think of:
- No Strategy
Did you have a good enough strategy while starting out in the first place? Or were you just making profits by sheer luck? As a trader, you must have a proper strategy in the market, especially if you wish to make good amount of money and stay in the game in the long run. Identify your goals and make a plan.
- Bad Strategy
There is a possibility that you have copied someone else’s strategy, thinking that it will work for you. Or you haven’t worked enough on developing your own plan. And if you haven’t gone deep in making your strategy, then chances are that it is bad, and is creating losses for you.
- Stagnant Strategy
As market scenario changes, you need to keep changing your strategy in order to make the most of the current situation. If you stick to the same old strategy for a really long time, then it won’t work in all kinds of market situations. Be alert and smart enough to modify the plan as per the existent market situation.
- Wrong Moves
Sometimes, you don’t have a clear idea of what are good entry and exit points, and what are bad ones. You just keep going by your gut feeling and experience a few gains in the beginning, which makes you think that you are going right. But soon, your losses start to accumulate and you don’t realize that you are going wrong on the entry and exit points.
- Volatile Market
There are times when everything you are trying to do fails simply because it’s an off period, and the market itself is too volatile. Your winning strategies may not work, however much you modify them, because it’s just pure fate and circumstances going bad.
How to avoid it?
The simplest and the most effective way of avoiding Trading Rut is to make a good strategy and then stick to it, without letting your emotions come in the middle. Experienced forex brokers and stock traders know the importance of formulating strategies. Once you realize that the market situations are changing, re-work on your strategy to change a few things here and there. Always remember that your work doesn’t get over when you make a strategy once; you need to keep modifying it as per changing market trends.
Be strict with yourself and keep giving yourself reality checks every now and then, so that your feet remain on the ground and you don’t build castles in the air. Remember that trading is not a game, and is serious business.