LEARN TO LAST PSYCHOLOGICALLY
“Cut your losses short, let your profits run”… must be the most repeated phrase in Trading. And if you’re new to this, trust me, don’t argue with it. The biggest mistake that you could make is to make a small loss balloon to a big loss. The other one is to make a small loss balloon to a big loss. I know, because I did it and got wiped out.
What? Didn’t you know?
OK first let me tell you, if it is not obvious in what I’ve written so far, that in the business of Trading, losses are OK. Nobody told me that in the first years of my trading. One of the psychological preparation that you should include to Learn to Last in Trading is to accept that Losses is part of the Trading business. Small losses. I repeat : Small losses. I touched on this on the article “The Need to be Right and Other Myths”
I believe losses is part of doing any kind of business. Think about this : a business, to be successful, needs customers. And it is expensive to attract customers, for every 30 contacted, only 6 may sign up. They lose money on the 24 that didn’t. That’s also why companies have “Loyalty programs” – they want to make the most money from the customers that stay with them. Like so in trading, you have to tolerate 24 small losses of say $1 each — equal to $24, but make the most of the winning trades. 6 trades could comprise 2 trades of $3, 1 trade of $6, 2 trades of $7, 1 trade of $10 for a total of $36. Spending $1 for each trade or $30, you get $6 in the end which gives you a return of 20% (not including fees). The key to trading is making the most profit out of winning trades. So “cut your losses short and let your profits run”.
|No. Of Trades||Amount Won||Total Value|
|No. Of Trades||Amount Lost||Total Value|
|$36||value of winning trades|
|$30||amount spent for 30 trades at $1 each|
|0.20||percent return on capital|
When you lose BIG
To analyse the mistake of making a small loss a big loss is not a simple one. Psychologically it could involve not accepting a small loss because of “ego” (you don’t want to admit when you’re wrong) or you are “hoping” that the move will return to your favour, or that you feel important when you get sympathy over the loss. Or all of the above. (Oh noooo!) One major loss I had was a result of being “distracted”, since I was on maternity leave taking care of 3 kids under 5, my world was confined to home and missing family and friends (you know, adult interaction), I got too involved with trying to catch up with loved ones in social networking. Wayyyyyy toooo much!
After the major loss, feel bad if you really feel that way. I’ve learned in Dr. Tharp’s Peak 101 workshop that it is healthy to feel your feelings. Rather than suppress it or go in “denial”. In your case as in mine, you might find a deeper reason as I found out later. This is the time to be honest and open to your thoughts about the issues that keep away your focus or do the right thing. We all make mistakes . The important thing is you recognize the mistakes you do which lead to runaway losses. You take personal responsibility and seek to learn from the mistakes and improve. Then you have to free yourself. There is a beautiful ceremony in Thailand called “Yi Peng festival “, traditional belief has it that when these huge hot air balloons are set adrift and float away, so do the troubles of the persons who launched the balloons. ( Northern Thai people celebrate the Festival of Lights in November of every year . Besides this festival, lanterns are released into the sky in other occassions, just like in New Year’s Eve.) Say goodbye to bad feelings.
DO this regularly, “talking to yourself, learning and releasing”, and taking care of your needs. As a mother, it is our job to take care and nurture the children. We often forget to take care of ourselves, as in, we are the last in everything. As I found out, we take better care of people around us when we ourselves are happy and whole. If you need to go get some pampering or retail therapy to keep yourself from snapping then do it. (OK so you know this already? Good!)
I further recommend the Peak Performance Home Study Course for Traders and Investors and Peak Performance 101 Workshop from Van Tharp Institute. Both had been extraordinarily enlightening not just in dealing with losses but straightening out my meandering Life
After getting WIPED OUT
Hopefully you don’t get to the point of being wiped out but if you do, I’ve been there and have handy hints ready. Try these :
Sounds familiar? “Eat, Pray, Love” is a book and movie (starring Julia Roberts) about a woman’s journey of self-discovery. Go read it sometime.
At this point you would be really thinking and deciding if Trading fits in your life. Hopefully as part of your self-discovery, you get to recognize that we all have our need to achieve security / financial well-being, heck even just managing money matters for our everyday lives. Because that need is there, it’s got to be filled.There is a part of you that need to take charge of your financial well being so you were looking at Trading, right? And this is not just on a personal level, I am not saying everything revolves around money but money is a tool that keep civilizations going. Like this thing was started in the age of the Sumerian empire …. that is sooooo BC! (Before Christ my darlings…)
Being a “Trader” might not be the ultimate of what you want to be but does it still fit in your life plan? I told you about my miscarriage which made me think about Life. I decided that from henceforth I will do the best I can as a mom and to provide for their needs I will also be a Trader. I even started calling myself “TraderMom”…. So you can see me bring my children to school or the park or playgroup and shopping errands and monitor / act on my trades using my smartphone. (I prepare before that though). A trader I met started out from being a mountaineer and he wanted to climb Mt. Everest (he is that passionate). He started to trade to raise funds for the climb. He now manages money for his family and friends. I think it is a natural consequence that, once you get to have good results in something (like Trading), you learn more and get good at it. Like I’ve learned to bake bread (wooooo hoooo — with the help of a bread machine) hehehe. It is entirely possible to add to what you are already. A fascinating creature of many and superlative talents and achievements. Multi-dimensional. Diamonds have nothing to you, girl! (We talk ourselves into it!)
Now going back to trading again after losing all of your money — I want to share to you the three things that helped me:
I lost so much money early on when I first started Trading. If there was one consolation, it really cemented the fact that people can make serious money from trading the markets (the people who are more skilled than you hehehe). Though I heard that people go back to trading to get back what they lost (like with a stroke of magic their money will return to them ) – my main reason for going back to Trading is that I realized that “I made a lot of mistakes, which I learned from, and if I don’t go back to Trading , I am throwing those lessons away.” Though it was painful in the beginning to have to lost all that money, I’m glad I did it since I knew I learned a TON, got “out of my comfort zone” and made progress on something I really want to succeed on. Isn’t that good? Treat the loss as a “pruning” from which new life flourish.
Since you’re still reading this, I presume you really want to learn to Trade. Yesssss!!!
Here are some of the ways to get back your courage :
1. Heroes - people who have gotten successful in the field, that you can look up to and learn from or serve as inspiration.
a. Billionaires Warren Buffett and George Soros are known as uber-rich and influential investors and traders.
b. Have you heard that American star basketball player LeBron James has been seeking to be the wealthiest person and consults with Warren Buffett? Talk about being multi-dimensional.
c. John Keys, Prime Minister of New Zealand built up his fortune from being a FOREX trader.
2. Check what’s missing in the above list. Women. Very few women trade and it’s a shame. You could be the new heroine for women traders! You go girlfriend!
3. Then there’s the usual activities that give us natural feeling of being positive. The list is long, but here are my favourites:
a. Music – there are just “anthems” that make you feel powerful. “We are the Champions”, “I Believe I can fly”, “Don’t Stop Believing” etc or even fast-tempo music that will get your energy going.
b. Walking – love the exercise and help me to clear my mind
c. Art appreciation – I don’t know why but seeing a beautiful painting, sculpture, dance or dress just give me so much inspiration and heightened feeling of my own capabilities.
d. Family and Friends – positive and honest people that appreciate and encourage you to give your best, inspire and support you. It would be nice if they can give you cash too. hahaha
e. Everyday, I start the day with Prayer, Goals, Affirmation, Gratefulness. It’s part of my preparation work in my Trading Procedure.
One of my current favourite reads is written by J.Alexander ( also known as MissJ, the 6 feet 6 inches, black drag queen in America’s Next Top Model). In his book “Follow The Model”, he wrote “The idea that God helps those who help themselves really does work. And the operative word there is work. You have to be willing to work hard, and if you do, other people aren’t going to be the only ones who notice. The universe does too. I don’t know how to put it much plainer. It has always worked that way in my life and my friends’ lives as well. Complaining and bitching about your situation will get you nowhere in life. No one wants to hear it, least of all a Higher power who has got more important things to do than listen to somebody whine without taking any action.”
In most big losses, I admit to not doing my work in TRADING , especially the homeWORK, the preparation.
I hope you get to last long and learn enough to make your harvest in Trading.
As my Muslim friends say, Inshallah (God willing).