No matter how good you are at binary options trading, it is going to happen sooner or later—you are going to have drawdown in your account.

If you are managing your money conservatively, hopefully that drawdown will not be too large, but even with relatively small trade sizes, your losses can stack up.

If you are investing just 2.5% of your account, all it takes is four losses before you have blown almost 10% of your account.

10% is a pretty devastating blow.

If that happens to you, you are going to go through a lot of emotions all at once. You are going to feel desperate to get the money back, which may make you want to compulsively trade. You will think, “If I could just get it all back, I could start moving forward again and I will be all right.”

But you will also feel scared, maybe too scared to pull the trigger. You may even find yourself completely frozen. You also may feel angry at yourself for losing the money at all, or confused as to why you did lose it.

The worst thing is the feeling that you are out of control, and things are only getting worse. Suddenly you may feel like your fate is just that—fate. You may wonder if you are really at luck’s mercy after all.

At this point it is easy to start getting irrational and making irrational choices. But before this drawdown started, you were trading well. You were making consistent money, grooving with a broker and it is possible to get back in control.

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But how do you actually do that? How do you return to profitability? Everyone is different and so is every situation, but here is a concrete 10-step action plan you can follow if you are feeling totally lost.

  • Pause live trading.
  • Try and figure out if the problem involves temporary market conditions. If it does, take steps to curb your losses and trade more conservatively (or wait).
  • If something more is going on and you are totally lost, halt live trading completely.
  • Troubleshoot the problem.
  • Stay constructive and do not get down on yourself.
  • Have a plan for how you will be spending your time while you are not trading live.
  • Take time off if necessary.
  • Ask for help from the community.
  • Test possible solutions.
  • Get back to trading live when you are profitable in demo again.

Now let us look in detail at each of these steps and talk about why they are important.

Pause live trading.

If you are an aggressive trader, pausing live trading will probably be very hard for you, which is why I did not suggest stopping outright. In fact, you may not need to. If the market is just a little choppier than usual but still offering up good trades, you may be fine if you trade more conservatively. But first you have to pull back from what you are doing and look at the situation objectively if you can. You need time to cool down your emotions. So hit “pause” on your live trading, and proceed to step two.

Try and figure out if the problem involves temporary market conditions. If it does, take steps to curb your losses and trade more conservatively (or wait).

If you do notice that the market is a little choppier or less predictable than usual, but still offering up opportunity, you may be able to continue trading, but only if you do so cautiously. You should take fewer trades than you might under other circumstances. Be extra aware of market context. Look not just for “A” trades, but for “A++” trades. Additionally, you may want to reduce your investment size. If you usually trade around two percent of your account, consider sticking with one percent for now.

You also have the option of simply waiting through this choppy period and getting back to trading when the market starts behaving again. This may be part of a longer-term adjustment, which may require you to make one as well, but often these choppy conditions are temporary setbacks. If you are patient, you can simply wait for them to pass, and then resume trading as usual without modifying your system.

If something more is going on and you are totally lost, halt live trading completely.

If you sense that there is something else that has changed—something that will require an adjustment—then you may be at the point where you need to actively stop all live trading until you find the solution.

This can be a scary time, because you may be completely baffled. You may have a hard time figuring out if there has been a long-term change in the market, or if the change is in yourself or how you have been applying your method. Regardless, the most important thing is to stop losing money while you are trying to figure it out. Going through a period where you are not making money is scary enough. There is no reason to make your problem worse by tacking on losses you could avoid on top of that.

It takes real discipline to stop trading while you tackle a problem, but it may mean saving your trading account. You have worked way too hard to blow it just because you are panicking.

Troubleshoot the problem.

Your next step is probably going to be the hardest one, and that is to figure out what is going on and why you are losing money. And then you have to figure out how you can start making money again. This may involve a change in your method, how you apply it, or in your attitude. Sometimes it may mean switching to another asset than you usually trade.

Analyze the charts. Look at different timeframes. Research the economic situation. See if you can figure out if there is a long-term adjustment taking place with the assets you trade which will call for you to make changes to adapt. If not, ask yourself if you have been doing something different in how you use your system. Have you been unwittingly making a mistake and doing something sloppy? Have you been trading differently without testing the change? Sometimes this happens without you even being aware of it. Are you making other bad decisions like emotional trading which are costing you? Are you trading your system without paying attention to context?

Stay constructive and do not get down on yourself.

Handling the technical end of things when you have a drawdown is hard, but sometimes managing yourself is as difficult as managing your trading. When things go wrong, your first instinct is probably to get down on yourself. Whether you see the mistakes you have made or not, you probably are blaming yourself for losing money or not being smart enough to fix it faster. You may even think your luck is cursed and you are simply not meant to succeed. You suddenly find yourself reliving past failures and wondering if you are caught in a loop.

While you should take responsibility and hold yourself accountable for your losses, not everything is your fault, and there is a big difference between taking responsibility for your mistakes and condemning yourself. Far too many good traders shatter their own confidence through their destructive reaction to adversity.

The problem is, you need that confidence when you are down even more than you need it when things are going well. You need to believe in yourself and your ability to solve the problem that is costing you money. Otherwise you will stand in your own way, and you will miss the solutions that are in front of you. You will continue compromising your emotional judgment, which may lead to even more mistakes.

Have a plan for how you will be spending your time when you are not trading live.

Part of staying constructive is also staying productive. When you wrote your trading plan (you do have your plan in writing, don’t you?), you almost certainly focused most of it on what you would be doing while trading. After all, it is called a trading plan.

But a great trading plan also should include a list of activities for the times when you are not going to be trading live. There are going to be times like this when you are pausing trading activities because you either need to troubleshoot or you are just waiting for the market to self-correct. When you have an occupation where your job for days, weeks, or sometimes months can literally be not trading, you still need to use that time well. If you do not, not only will it take you longer to get back to trading profitably, but you may even be tempted to take trades in the meantime that you shouldn’t.

So what can you do during that time? Aside from troubleshooting, there are a number of other trading tasks you can catch up on. In trading, you always need to be learning, testing, and trying new things. Read a trading book or eBook, take a course, watch some tutorials, talk to other traders, test new strategies, or try out adjustments to old strategies. Whatever you do to fill your time, it will help you take a step back and will discourage you from overtrading.

Take time off if necessary.

While there is a lot you can be doing to improve your trading even while you are not actively participating in the market, sometimes to cope with a drawdown, you may need to take actual time off from trading activities altogether. You need time to level out your emotions and see the world more clearly. Other times you need perspective you are not getting from doing the same activities over and over each day.

This can also be a good time to bring some balance back into your life if you have been heavily investing your time and energy into trading lately. Maybe you have been neglecting other parts of your life. You could take this time to work on a personal project you have long been ignoring, or you could pull an old hobby out of the dust. You could put more time and energy into your day job, or you could spend more time with your family and friends. You might even go out on walks and spend some time in nature. You could even take a trip if you can afford that, even if it is just a weekend break.

There are other forms of profitability in your life, and even while your trading activities are on hold and your account balance is holding, you can see increases in those other life areas. You just need to cultivate success by recognizing that the value of your life is measured in more than way. Not all profit is monetary.

Sometimes refreshing your perspective through time off can seem almost magical. It may not solve all your problems, but it may help you see a different path than you would usually take. Think about an ant trying to navigate around an obstacle. Ants always seem to find a way through, but they are not averse to investigating roundabout and unusual routes. If you want to explore alternate paths, that means steering away from your usual activities and spending your time differently. Plus, if you are waiting for the market to correct, sometimes it does just that while you are away!

Ask for help from the community.

Sometimes the perspective you need comes from somebody else. Many traders have years of experience, often coping with problems similar to the one you are facing now. Someone else you know may already have worked through a different version of the challenge you are dealing with. They may be able to offer you just the perspective you need for a breakthrough.

I would not wait long before trying this if you really feel lost. I may have listed it as step eight, but it is something you should do right away if you realize you are truly stuck. The best thing to do is join binary options forums and even other trading forums (Forex, CFDs, etc.). Look for threads where traders who use similar methods are hanging out, and post some of your recent charts. You may be surprised by how quickly someone else can spot the problem with your trades. Remember, they may have made the exact same mistake once, and suffered a similar drawdown.

Victories in situations like these can be hard-won. But that is exactly why so many traders are happy to share their knowledge. They want to pay it forward, because they know that next time, they could be the ones in need of help.

Test possible solutions.

By this point, your efforts should start paying off. It may happen within days, or it could take weeks or months. But you will start getting some theories and ideas. Assuming the problem has not solved itself (the market conditions correcting, for example), it is time for you to test solutions to the problem.

I recommend that you go back over the recent time period in your charting platform and you see whether adjustments to your system or strategies would have prevented the losses. If they do, it is important to understand how and why. That will help you to identify similar situations in the future and to avoid repeats of the problem. You may also want to go back over earlier time periods and see how the newly adjusted system behaves in different market conditions.

Get back to trading live when you are profitable in demo again.

At this point, it is time to get back to demo testing. Do not start trading with real money yet, even if you are feeling more confident. You may still need to get used to certain aspects of trading with your newly adjusted strategy in real-time. You will want to work through those possible issues without actual money on the line.

Once you are profitably trading in demo again for a time period you are comfortable with (how long depends on what expiry times you trade), you will be able to start trading live again. I suggest if you are still feeling gun-shy, that you keep your investment sizes small. Trade conservatively with half the amount of money you normally would. If that goes well, then you can resume trading with your usual amount.

At that point, you should be feeling a lot better! If you still feel nervous, that is normal. Once you go through something like this, you may feel anxious that it could happen again at any time. But you should feel encouraged too, because now you know that you can battle through adversity to victory. You should also be a lot more knowledgeable about the technical aspects of trading, and you should know more about yourself too. All of that will help prevent similar mishaps in the future. And next time you experience drawdown in your account (and yes, there will be a next time), you will know what to do!