Advanced Trading Psychology - Gaining Perspective During a Downswing

One thing that the Betfair Trading Community is known for is it's real and frank discussions about downswings. Unlike other sites and services in this industry we actually talk about this reality which we know our members thank us for because learning to deal with it can be the difference between making money and losing money trading.

This is purely because the reality is that every trader, good and bad will have periods where they do not make money. It is simple maths, even if you have a slight edge on the market you can still have bad luck, good trades can lose money and vice versa. 

A good example of this is in poker, if you watch a pro poker player they will always put their stake at risk when they think they are a 60% favourite in a one on one showdown. They know that they have a 10% edge in this situation (the odds of winning are 50/50 with 2 players playing a random hand). They also know that 40% of the time they will lose their stake but that is fine because they know that over time (thousands of hands) their 10% edge will make them a lot of money.

I think many good sports traders struggle with this concept not because they do not understand it but because losses hurt. It is very difficult to look at a losing trade and think 'You know what I did everything right there but fortune did not go my way'. We remember the losses better than the wins and we want to get that winning feeling back but we have to trust in the process and not make silly trades in deperation. This always ends in disaster (eventually). 

Chasing was a big problem for me when I started trading on Betfair 15 years ago, I would build up a nice bankroll time and time again and blow it in two or three trades. What I want to talk about today is how I overcame that mentality and ways we can gain perspective. 

1. Dealing with the pain of losing - Most people hate losing, we are taught that losing is a terrible thing but actually it can be a positive. Sloane Stephens said after losing the French Open tennis final this weekend 'In Grand Slam finals there are winners and there are learners.' Lines like this are easy to dismiss as a bit airy fairy but the reality is there is a lot of truth to this. Check out the book 'The Obstacle is the Way' by Ryan Holiday if you want to do further reading on this. Try to gain something from each loss and learn as much as possible through the pain. 

2. Realising there are worse things in life than a losing trade - It is easy to get caught up in how important something feels to us personally and let ourselves momentarily lose perspective on life but the reality is one or two losing trades are unlikely to have a major impact on your life. We all have things in life to be thankful for, for me it is family, friends and fairly good health, we are all still alive at the end of the day! It may be different things for you but remember trading is not the be all end all of life. 

3. Don't get stuck in the rut of depression from losses - Self-pity is fairly common after a bad run or big loss. You need to get out of that rut in whatever way you can asap. There are a few things that worked for me.

• Turn off the computer and do something non-sport or trading related. Go to the cinema, spend some time with your loved ones or even play some computer games/read a book. 
• If you can afford to match the losses with your own money and put them into savings. You lost £100? Put £100 into your savings. It helps to feel more secure in that you have invested your money into a place you cannot lose it from. 
• Give some money to charity - A bit leftfield but always helped gain some perspective and makes you feel better about yourself, even in a tough time financially you found a way to be generous to those more in need.
• Go for a walk - take in the countryside and listen to nature living on, life goes on just the same as it always did, your losses have not shaken the world as much as they may feel like they have done. 
• Tell someone - Just telling someone about your bad run or big losses can help alliviate any guilt or pressure you may feel. I will always tell my wife if I have a bad loss, she will support me no matter what and that doesn't half make you feel better. Speak to a mate if you don't have a partner you can talk openly to. 

These are simple guidelines to follow but difficult to master long term. Remember even the best traders in the world have bad runs even Ryan Carruthers and Richard Futter. One thing I do know for a fact is it does not shake them or stop their momentum moving forward and neither should it for you.