When I see volatility in markets spike up my initial thought
is not my own account but those of other traders who have failed to exercise
proper risk management principles. On more than one occasion I have seen many
trading colleagues lose every last cent in their accounts due to the lack of
discipline, the thrill of catching a move or the need to be in the market at
all times.
So I thought I’d give you some pointers on what to do should
you find yourself in the same situation and how to deal with it. A harrowing
experience to encounter but one that allows us to extract a great deal of
learning from whether it be our own accounts or someone else’s.
Is trading the right thing for me?
This is certainly an important question you need to ask
yourself as you get to a point where you begin to make sense of it all. Not everyone is cut out to be a trader as it
requires you to assume significant levels of risk that might not sit well with
your personality. If you think about the
number of featured films chronicling the life and times of some of Wall
Street’s infamous players you do get the sense of exuberant lifestyle with
endless bank balances. But note the
extremities in their behaviour from explicitly euphoric to manic monsters.
At the end of the day their lack of emotional control lands
them in serious trouble which is the same fate you could meet should you fail
to keep your emotions under wraps.
Hollywood may try to idolise these misfits but your trading account won’t.
It spits out the unbiased consequences of an ill disciplined trader.
Doing the trading detox.
When you’ve suffered huge losses on your account the
sensible thing to do is step away for some time to allow your mind to revert
back to reality. What we don’t realize at the time is that the punishment we’ve
subjected our minds too while attempting our ill-fated actions has wrecked our
logical train of thought by unsettling the balance. Release your mind from the
worry by doing something different from your routine.
You find that we become so encapsulated by the market that
we don’t give ourselves sufficient time to cool off to emotionally repair our
minds by thinking of what has played out. We so caught up in the moment we
believe there’s a need for our presents in the market because the next move
could prove fruitful or fatal.
The markets have stood the test of time; it will always be
there for those to profit and those willing to give it all away.
Identifying where you went wrong.
Let’s face it no one likes to admit they made mistakes, we all
like to think we perfect but in today’s fast paced world it’s very easy to trip
up. Trading falls into the same category
of thinking when we fail to fully accept the responsibilities of being
wrong.
Your trading account didn’t end up this way by chance;
somewhere along the line of process you miscalculated your decision. Be truthful to yourself and do an honest
assessment of your actions without being regretful of what you have done. No one is immune from the markets ability to
point out precisely the many flaws they possess.
There’s two ways of thinking about this, either you take it
as the market making you look like a fool or you see it as a chance to put it
under a microscope, see where it was that you messed up and correct it so that
the next time the same situation comes around you have a better understanding
on how to deal with it.
Taking time to build new trading capital.
Trading capital is precious and when lost that feeling you
get in your gut knowing that its gone isn’t pleasant. Money and more specifically losing it is a
very sensitive issue for most people, I can’t think of why it wouldn’t, but
trying to “get back” at the market to reboot your cache really isn’t the
smartest thing to do after a heavy drop.
Use it as an opportunity to build up your capital by placing
emphasis on the work needed to reach the level to be fully operational again.
This way you’re learning to appreciate the value of trading capital and more
prone to taking care of it.
Finding trading support groups.
In the age of technology it’s never been easier to find
like-minded people with similar interests and experiences willing to share it
with you. Social media is home to many a
forum on a variety of interests with trading not being an exception. However be
cautious when choosing who to follow as it has a detrimental effect on your
progress.
Sharing your experiences in the company of others who have
faced the same circumstances enhances your ability to accept your mistakes and
seek advice on ways to deal with it. Added to the fact that it aids your growth
being exposed to other traders it also nice to know you have a refuge to go to
when you hit those low points and in need of motivation.
If you would like to contact me you can through my email at cadetrader@gmail.com or if you wish to follow me on twitter and get the latest updates of news, interesting commentary and general trends in the market, my twitter handle is @CadeTradeR if you follow this link it’ll take you directly to my twitter timeline: https://twitter.com/CadeTradeR
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