Dealing with disappointment is a common feature when trading

I'll be away from the 19th April till the 4th May so I won't be around to produce new content. I decided to to re-publish old blog posts that focus on the psychological aspects of trading so I hope you enjoy! See you soon 

5 Effective Ways to Cope Going From Hero to Zero 

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.