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Are you experiencing an emotional roller coaster, euphorically celebrating wins, but facing despair when losses mount? If you are, you may be taking things a little too personally. If you want to trade like a winner, you need to take responsibility for your actions, taking every precaution possible to neutralize adverse events and to control risk. That said, when things go wrong, it may not always be your fault. You may merely be part of a faulty "system."

Have you ever worked at a large corporation where the general business plan was faulty? Take Hewlett-Packard, for example. Major changes were made in the past, which undid what the previous CEO accomplished. Who were some of the victims of a faulty plan? Mid-level managers probably paid the price for decisions for which they had little input. Was it their fault that the old business plan wasn't working? No, they were merely trying to make the company profitable using a business plan that just wasn't going to work in the current business climate. It's the same with trading. You may have trading strategies that worked under different market conditions, but they don't work today. You may not have the financial resources you need to trade profitably, yet you are trying to make it work when there's little chance that even a market wizard could do it. You may be under-capitalized for your methods, or lack the personal time required to make changes needed to fix what was wrong.

Why beat yourself up if you can't fix something that is severely broken? You can't put a broken egg back together again, so you might as well make scrambled eggs. Similarly, with trading, you need to fix whatever is wrong with your strategies or methods as soon as possible. You don't have time to blame yourself for what went wrong. It's better to concentrate on how you can change what's going wrong by taking an objective, problem solving approach. Don't take things personally and emotionally.

When things don't go your way, do whatever you can to change matters, and do it fast. Don't continually assume that every unpleasant event you encounter is your fault, and that you should take the blame as if you did something wrong. Don't ridicule yourself for making an understandable mistake. Now, at some abstract level, it may be your "fault." Ultimately, you are in control, but it doesn't help you recover from a setback to constantly dwell on how you did something wrong and should be blamed for it. When we take too much responsibility for our actions, we tend to blame and punish ourselves when things go wrong, the same way our parents may have punished us when we were children. When it comes to performing a task, such as entering or exiting a trade, you have to de-personalize or objectify matters. Rather than consider the "meaning" or "personal significance" of an action or event, it's more useful to think strategically. Concentrate on the ongoing process of trading.

So when things go wrong, don't think emotionally, think strategically. Concentrate on what you can do next to solve the problem. Enjoy the intellectual challenge and rise to meet it. If you can avoid taking setbacks personally, you'll rise to higher levels of experience, and trade like a professional. 

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Tuesday, 23 July 2024

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.