Prop trading isn’t for the faint-hearted. One minute you’re in sync with the market, and the next, your P&L takes a brutal hit. It's a performance game, and when you’re trading firm capital, the pressure to bounce back is intense.
So what do you do when you suffer a significant drawdown?
Firstly…know this. You’re not alone. Every high-performing trader has faced this. What sets professionals apart is how they respond. Let’s walk through the mindset and tactics you’ll need to recover and return stronger than before.
Common Emotional Traps
1. Revenge Trading
Losses can spark a dangerous urge to ‘get it all back’ on the next trade. But chasing losses leads to bigger ones. It breaks risk protocols, erodes discipline, and damages your track record - fast. Revenge trading is a surefire way to get benched or even cut from a desk.
2. Trading for the Thrill
Prop traders thrive on challenge, but when the thrill becomes the reason for the trade, that’s a problem. Overconfidence is a real risk early in a trader’s career. You start feeling invincible, push size too soon, and blow out. Experienced traders know that excitement must take a backseat to process.
3. Fear – Including Fear of Success
Fear doesn’t just come from losses. For many, the idea of consistent success and what that would demand is even more confronting. Can you handle the pressure of scaling up, of becoming one of the top traders in your firm? It takes courage to not just imagine it, but to believe you're capable of it.
The Psychology of Recovery
Emotions aren’t the enemy – staying stuck in them is.
Strong emotions are part of trading. But research shows that traders who learn to downregulate negative emotions make better decisions. If you feel rattled, you need a reset, not a re-entry.
Let’s break down the five key tools to get you back on track:
1. Regulate Your Emotional State
Emotional regulation is the #1 trait of long-term profitable traders. When you can acknowledge intense feelings without acting on them, your decisions improve. Calm heads protect capital.
If you’re in fight-or-flight mode, you’re not seeing the market clearly. Pause. Breathe. Then act.
2. Tune Into Your Body
Prop traders in London have been shown to have sharper awareness of their internal signals, like heartbeat and breath rate, than non-traders. This ability (called interoception) has been linked directly to profitability and longevity at the desk.
Learn to notice your physical stress tells. Are you rushing? Tensing up? Pushing size without thinking it through? That awareness is a performance advantage.
3. Reframe the Loss
Losses feel personal. But they’re data. Use cognitive reappraisal, a psychological technique that helps you reframe the story. You didn’t “fail”. You received feedback. You found a flaw. Now you fix it.
Reappraisal boosts resilience, decision-making and emotional control – all critical in the prop world.
4. Use Deep Introspection
No distractions. No screens. Just you, your trade log, and honest reflection.
What rules did you break? What assumptions failed? What did you ignore? Sit with the discomfort. The deeper you go here, the sharper your edge becomes later. The best prop traders use pain as fuel.
5. Journal It – Properly
A structured journaling practice can transform a major loss into your biggest growth point. Here's a 7-day journaling reset to process a drawdown:
Day 1: Vent it all. Go deep. Don’t censor.
Day 2: What did you actually do well? What will you do differently?
Day 3: Dig out any lingering emotion – what's still raw?
Day 4: If this loss was 100% your fault, what would you need to learn?
Day 5: What calms and re-centres you? Get clear on your recovery tools.
Day 6: Project forward 5 years. How will this moment have shaped your growth?
Day 7: Review the full week. What’s shifted in your thinking?
Even if you’re not trading yet, these exercises will build the psychological infrastructure you’ll need once the real pressure hits.
Final Thoughts
Prop trading success isn’t just about strategies or market calls. It’s about staying in the game when most would fold. It’s about resilience under pressure, adaptability in chaos, and emotional control in the face of both failure and success.
Every great trader has taken a hit. What matters is what you do next.
Keep your head in the game. Regulate your emotions. And trade like a professional.