Trading Educators Blog
Is there room for hope in trading?
In trading, hopelessness is not brought about by the situation, but rather by your interpretation of the situation. How you explain the cause of a bad situation accounts for how you cope with it. If you think, "I've always been incompetent and this is just another one of those times that proves how incompetent I've always been," you will tend to view the situation as hopeless and just want to give up. But, if you think: "Hey! This is only a temporary setback, I'll be able to get past it," you will seek out solutions for changing matters and overcoming a bad situation.
Optimistic thinking as opposed to pessimistic thinking has a direct bearing on how you are able to deal with trading losses. For example, suppose you are long and find yourself in the midst of a market that is limit down. The helpless and pessimistic approach to viewing this situation is to attribute the cause to some personality trait with which you define yourself. Maybe you see yourself as being incompetent in all that you do. To you, trading is no different, and that's how you got yourself into this bad situation. When you interpret situations in this way, you will surely feel extreme disappointment. "Why didn't I see this coming?" A better, more productive and optimistic approach would be to see that the failure came about due to a specific cause that is temporary and will soon change. You may think your trading strategy is must be ineffective, and that you'll have to come up with a new method, and when you do, you can recover from this situation. A trading strategy is specific and can be changed. By focusing on the changeable reasons for a problem situation, you will feel more optimistic and feel you can find effective solutions.
Trading is a tough business in which you must often persist in the face of defeat. The way you think, gives rise to the degree of persistence you will exhibit. It's counter-productive to allow yourself to think pessimistically, and attribute your failures to perceived personality traits, which are not easily changed. Instead, see failures as arising from temporary specific causes, which you can change. By looking for specific aspects of your trading that you can actually change, and believing you can change them, you will face difficult situations with a positive attitude rather than despair and hopelessness.
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