Acting in anger and making bad trading decisions that result in losses is something that a lot of people do on autopilot. By the time they realise what’s happened it’s too late and they find themselves “in the market wishing they were out”. If this common problem effects you then the following steps will help you eradicate it from your trading.
As traders we encounter anger inducing situations a lot – almost daily. It’s a regular part of trading life and without a strategy to deal with it you can find yourself angry a lot of the time and suffering losses as a result.
When things don’t go your way you’re hit with a double whammy of:
1. Being wrong
2. Losing money
This is a horrible combination and for most traders what happens next is a knee-jerk reaction that rarely ends well. It’s all very well knowing that revenge trading and trading in a bad state of mind is wrong and you shouldn’t do it. But in the heat of the moment the compulsion often outweighs this wisdom and the unconditioned trader either does it without realising or *consciously decides* to do it in a “I know I shouldn’t do this but I’m so mad I’m gonna do it anyway!” kind of way,
So how do you reprogramme yourself to stop doing this and develop the emotional strength to power through these challenging situations?
1. Expect these situations to happen – when you understand and accept that the market is going to kick you around it’s a lot easier to deal with it when it happens. However “wrong” or frustrating the event is just know that your systems will deliver losing trades, whipsaws will happen, stop loss hunts will happen, “unconfirmed Twitter rumour” news spikes will happen, central bank intervention will happen. Assuming you have a positive system to follow with rules and you exercise proper money management none of these types of events should ever be a big deal.
2. Prepare yourself for when they do happen. When you know and expect bumps in the road it makes sense to be prepared. In this case you should expect that when these events occur you are going to feel a certain way. Know that you will feel an urge to scream, throw something out the window and make rash trading decisions you will later regret. So have a defined course of action lined up. It could be – step away from the computer, count to 20, go outside, walk/run around the block, hit a punchbag – anything to interrupt the automatic action/reaction pattern and open up a space to make a sound and rational decision
3. Develop an indifference to individual trades. This can be hard at first but with continued practice gets easier. Make it one of your trading goals to view wins and losses the same way you view credits and deposits in your bank account. Do you beat yourself up for being wrong when you see a mortgage payment on your statement? Of course not. Can you view trading losses – and wins the same way? That’s your challenge – your goal – think you can do it?
If yes then go and do it! developing the self mastery required to trade successfully is all about doing, not just knowing. Practice these points and you’ll end up doing it naturally.