How to Navigate a Trading Funk

Everyone has been there, and the past few months have not been easy.

I’ve seen and heard about a number of folks struggling with their trading and investing over the last month or two, so I figured this would be a good time to write an article on how to get yourself out of a funk.

Have you ever heard that saying, “if someone is asking a question, it’s likely that someone else has that same question”? Well, if a few people are struggling, I can only assume that there are others out there who are also struggling and just haven’t spoken up or mentioned it. So for those out there who are struggling in silence this is also for you.

If you’ve been struggling, just know you’re not alone. Most of the stocks that worked over the past year haven’t been working lately and the market environment has clearly shifted. Let me just say losing money is one of the most mentally painful experiences there is. People work very hard for their money. It’s the reason they commit to a 9 to 5, sacrifice time with friends and family, etc. People structure their lives around earning a paycheck. In the market a single bad decision can erase months or even years of that effort if you’re not careful. Money carries a significant psychological weight and when it’s lost it can cloud our judgment and push us into even worse decisions.

I can imagine that many are saying, “I have made no progress or am losing money hand over fist, what am I doing wrong and what should I do?” That’s a very common question. No matter how much experience you have, you will go through highs, lows, peaks, valleys, and much more as both a trader and an investor. There is no escaping that reality, this game is the most mentally stimulating game you can find. What you can do is learn how to recover, prepare, and improve so that things can turn around.

I will preface this by saying the most important thing you must do is recognize it. It’s difficult to tell in the moment but if you take a step back after a few losses or even a single big loss, you’ll likely identify subconsciously that you are not in a “flow state.” A flow state is when the market comes naturally to you. You can execute with confidence and ease, you’re seeing the market clearly, etc. It’s nearly impossible to trade yourself out of a funk because the issues that need to be addressed are unlikely to be solved through the act of trading itself. Below, I’m going to discuss how I think someone can get out of a trading funk.

The first thing you must do is just stop. Stop trading, stop looking at the market, stop thinking about the market, etc. Easier said than done, but even if it’s just for a few hours, a day, a week, or longer, there is nothing better or healthier for the mind of a trader than disconnecting and doing a complete reset. The biggest issues and blow ups come when traders and investors can sense and feel they’re in a funk yet don’t do anything about it. Subconsciously, our brains tell us, “we need to make back our losses,” yet this is the worst thing you can do as a trader. When our brains are in fight or flight mode, we make impulsive decisions and take bad trades or make bad investments. “It’s easier said than done” I’m sure you’re thinking, and you’re right. If you’re reading this article, it’s very likely that you’re an active participant in the market and have a deep passion for this crazy game. Stepping away is hard… but it’s necessary, even if only for a short while. The market is not going anywhere. There will be opportunities in the market for the rest of your life. You do not need to make a life changing or game changing trade today.

From here, I like to examine my life. Yes outside of trading. Do I have anything bothering me externally? Are there stressors in my life? What’s my sleep schedule like? Am I going to the gym? Is there an upcoming event I may be subconsciously worried about? All of these factors play into my success as a trader. If I find myself stressed out, inactive, worried about something, dealing with a personal issue, or something else, my trading suffers. This is the first step you should take and once you’ve done this, work on either improving the situation or if it’s not something that can be improved, internalize that it could be subconsciously affecting your ability to trade and take a break. Once you accept that, the rest comes easier. There are periods of time where I have external factors influencing my trading. In early 2024 I was stressed in my personal life and could feel it impacting my trading. I suffered a drawdown which only made it worse. I deleted my brokerage app, got off social media, and stopped paying attention to the market for a week or so. From there, I downloaded my brokerage app again, slowly started paying more attention to social media, and eventually started trading again.

It’s difficult, but when I can sense those factors affecting me I simply step back. Many people don’t reflect on their life this way but I think it’s arguably the most important aspect of getting out of a trading funk. Sometimes this has nothing to do with it. There are times when life is going great and we still get into a trading funk, and that’s okay.

The next thing you should do is review your trades. I used to hate reviewing trades and journaling but I found it helped me identify exactly what mistakes I made, why I made them, and how I could have avoided them. It’s like studying. Nobody likes to study but if you want to pass the exam, you have to study. Trading is no different. You should want to do the “dirty work,” so to speak, because deep down you know this is exactly what separates a successful trader from an unsuccessful trader. Once you’ve reviewed your trades, it’s very likely you’ll see exactly what you did wrong. Whether it was chasing an extended move, buying significant weakness, buying a stock with no direction, etc. in hindsight it’s easy to see what went wrong. In the moment we’re blinded by the ability to make money clicking buttons which makes it very difficult to think clearly. But when we take a step back and disconnect from the market, it helps us see, think, and act more clearly. I’m sure you feel even slightly more tense when the market is open, right?

And that feeling goes away when the market is closed? That’s your nervous system settling down because “the game is over” and it’s okay to relax. You often think much more clearly. While reviewing your trades, it’s very important to be brutally honest with yourself, that’s the only way to improve. If you sugarcoat things or justify mistakes, you won’t make the changes required to move forward and you’ll likely repeat the same mistakes over and over again. Write the mistakes down. Be honest.

Once you have reviewed, identified, and journaled your common mistakes I would suggest coming up with a list of rules or parameters to avoid making those mistakes again. Sounds easy right? It’s not. There is nobody to prevent you from breaking these rules. Just yourself. For example, if you find yourself buying extended stocks after big moves or chasing you can tell yourself or write down, “I am not going to buy extended stocks.” Then the market opens, you see that extended stock, and your mind tells you, “just do it one more time, you can afford the loss.” Wrong. You have to be mentally strong and have self control. Close the screen if you have to. Without self control, you’re going to make the same mistakes over and over again. You need a set of rules centered around your specific personal mistakes. If you know you’re someone who loves to buy extended stocks you need to create a rule that prevents you from doing that. Nobody will enforce it for you. You have to be the one to do it.

Rules are imperative as a trader. For me, a few rules I follow are that I don’t buy stocks that are up three or four days in a row, I don’t take big positions when the indices are below key moving averages, and I don’t place trades if something in my personal life is stressing me out or bothering me. I think these rules could apply to just about anyone though some may disagree. You have to find and create rules that work for you.

The most important step of all is getting back into the arena (the market). You should start small. If you feel pressure to size big and make up your losses you’re already approaching this recovery phase the wrong way. If you took a $20,000 loss, your objective should not be, “I need to make that $20,000 back.” Forget about the $20,000. It’s gone. You have to accept that loss as money spent and not money lost that can be found again. If your typical position size is $50,000, try starting with less than half of that, maybe $15,000 to $20,000. Your ego will take a hit but it’s healthy. If you can’t make money trading $15,000 positions, why would you be able to make money trading $50,000 positions? If you lift weights or play a sport and sustain an injury, when you first return to the gym or the field you’re often told to take it slow or take it easy. That applies to trading as well. You are not too cool, too smart, or too rich to trade smaller after a few losses. Detach from your ego and sense of self. Be vulnerable.

As you begin trading again, it’s very important to recognize that the changes you’ve identified can only be implemented by you. Nobody is going to come and save you or make those changes for you. It’s all on your shoulders. Trading is as “you vs. you” as anything else out there.

One thing I also want to be very clear about is that progress during this phase is likely not going to be linear and you’re not going to suddenly flip a switch and feel like everything is fixed. One winning trade can sometimes be enough to get you back into a groove, but in reality it takes more than that. Some days you’ll feel confident and other days you’ll question whether you should even be trading at all. That back and forth is normal... recovery in trading looks a lot like recovery in anything else. It’s frustrating and uncomfortable but the key is that you are moving forward intentionally rather than reacting emotionally.

You also need to redefine what a “win” looks like during this recovery period. A win is not making back your losses in a week. A few ways you can define a win include following your rules by not chasing or buying downtrends, cutting a loser quickly, or even just shutting down the screen for the day because you feel your emotions running high and you don’t want to blow things up. These are what I consider small but meaningful wins and they compound over time and slowly rebuild confidence.

In conclusion, here’s the seven step framework I suggest using if you’re struggling:

1. Stop. Step away from the market before the market takes more from you.

2. Check your life outside of trading. Stress, poor sleep, lack of movement, or personal issues will leak into your decision making whether you acknowledge them or not.

3. Review your trades honestly. Identify exactly where things went wrong and write it down. No excuses.

4. Create rules that directly address your mistakes. If you don’t define boundaries and a clear rule playbook, the market will continue to hurt you.

5. Start trading again with smaller size. Forget about making money back. Focus on process and self control.

6. Redefine what a win looks like. Following your rules, cutting losers quickly, or walking away on an emotional day all count as wins when coming out of a funk.

7. Give yourself time. Confidence doesn’t return overnight. It can be rebuilt with time.

A losing streak does not make you a bad trader and it doesn’t mean you will never succeed. What it does mean is that you need to step back, reflect, reset, and adjust your strategy and mentality. The goal isn’t to just win today, it’s to win for 30+ years. If you’re struggling right now, don’t keep doing the same thing over and over expecting different results. You can and will overcome a trading funk, but it takes commitment and honesty.

My DMs are always open. Feel free to reach out to me if you’re struggling.

Have a great evening.