It’s Friday and that’s a good thing. It’s been a very interesting week worldwide and it shows. Israeli missiles were shot “across the bow” of Iran more so as a message than not. Where this will end up no one knows. Peace in the Middle East would be nice. I do not have all of the answers, no one does but it’s nice to see there’s a world leader out there with a set of cajones.
Rules are important. Having rules is important. Following your rules and your plan is more important. In turbulent times we prove just how human we are. I will conclude this article with an actual scenario that took place last night proving the accuracy of that statement but first Mahdi Nikpour, a very early adopter of our “teachings” and a citizen of Iran has the floor. We’ll catch up to you later.
How To Act After Losing Money
Weathering The Storm: Guide To Healing After A Big Loss
The world of trading is a thrilling roller coaster. Victories can leave you feeling like a financial rockstar, while losses can knock the “wind out of your sails” and leaving you to question everything. After a big loss, it's always normal to feel emotionally drained and unsure of what to do next. But fear not, the best way to “defeat” your enemy is to know your enemy, right? Yes it is.
Understanding the Emotional Rollercoaster
Imagine this, you just took a significant loss in the market. The initial shock might be followed by a wave of denial, "this can't be happening"! Anger might bubble up next, directed at yourself, the market, your broker, Jim Cramer, speculators, other traders, maybe even Jerome Powell himself. Fear and doubt then creeps in. You question your skills and hesitate to trade again. With time and self-reflection, acceptance sets in and you acknowledge the loss, learn from it and move forward. This emotional journey is completely normal. Recognizing these stages can help you navigate them effectively.
Losses Happen – It's How You Deal with Them That Matters
The severity of the loss, your trading experience, risk tolerance and actual financial situation can all influence how you bounce back. However, there are some “general” factors that separate those who overcome losses from those who get discouraged:
Accepting Responsibility: Blaming external factors for your mistakes hinders your ability to learn and grow. Analyze your decisions and identify areas for improvement.
Beware of "Get Rich Quick" Schemes: Anyone promising guaranteed returns is likely untrustworthy. Focus on honing your own skills and developing a solid trading strategy.
Learning From the Experience: This is where the magic happens! Dive deep into what went wrong. Did you follow your strategy? Was this just an emotional trade? Identifying the root cause will help you prevent similar mistakes in the future.
Building Resilience: Don't let one loss define you. Most successful traders have endured significant losses and large margin calls. Use them as stepping stones to develop a more disciplined and wiser approach.
Coping Mechanisms: Moving from Emotional Turmoil to Growth
Acknowledge Your Emotions: Don't bottle emotions up. Talk to a trusted friend, family member, therapist or even another trader who understands “exactly” what you're going through. Don't talk to someone who will just tell you that "you need a real job ". You have one, just learn how to do it better.
Take a Break: Sometimes, stepping away from the market screen for a while can help clear your head and gain a fresh perspective but don't be a stranger!
Focus on the Process: Instead of dwelling on the major loss, find enjoyment in the challenge of learning and analyzing the market. Celebrate your smaller wins and focus on continuous improvement. Remember, it's a long journey not a trip.
Seek Guidance: Consider working directly with mentors or therapists adept at specializing in financial psychology. They can provide valuable support and help you develop healthy coping mechanisms. Someone like Wendy Rhodes from the Billions and my dear friend The Ticker.
You're Not Alone
Many traders, even the legendary ones, have faced significant losses. The key is to learn from them, adapt your approach and come back stronger. Your losses can be your best teachers.
Here are some additional tips to survive:
Focus on Making New Money: Forget about "recovering" the loss. Shift your mindset to a sustainable, long-term approach.
Consider Alternative Strategies: If active trading just doesn't resonate with you anymore, explore long-term investing as a way to participate in the market.
Change Your Strategy: If you received a strategy from a guy on the internet or a family friend and it doesn't make sense to you, dump it. You need to make your own unique strategy.
Start Small: Don't just jump back into trading. Rebuild confidence with smaller positions and a stricter risk management strategy.
Focus on the Process: Enjoy the challenge of learning and analyzing the market, not just the outcome. Remember, this is a marathon, not a sprint.
The Bottom Line
Losses are an inevitable part of the trading "journey". By developing healthy coping mechanisms, learning from your mistakes, and continuously refining your skills, you can overcome these challenges and emerge as a more confident and successful trader. Remember, tough times don't last, but tough traders do!
So What Happened Last Night
I hope you enjoyed Mahdi’s thoughts about how to handle losses. He’s been on board with The Ticker from the start and without a doubt, as we grow, his influence will be on the rise.
Last night proved to me that (1) I’m human, (2) I’m biased and (3) I mistakenly did not follow my own rules. It happens and unfortunately it’s more common than not. I seek peace but I hedge against “out-of-nowhere” events. We had one from the Middle East.
If you follow me on LinkedIn or on The Ticker you would have witnessed first hand a little bit of how our indicators react to change. We were first to identify that an Israeli missile or two was striking inside Iran. We witnessed “something happening” and we reacted. In hindsight, our trading hedges would have been better served if we looked to follow our own rules. The safe bets, buying the Yen and U.S. Treasuries reacted as they should and ran higher. If we had followed our rules and taken advantage of this overall hysteria in these markets we would have reacted and taken the opposite side.
We didn’t. We just sat and watched it all happening, taking on more of a “reporter’s” role informing others. Shame on me. I was exhibiting what’s called an anchored bias. I formed an inaccurate belief that something bigger was happening. I was wrong, I just made a mistake not following my own rules and I was biased. Just like Mahdi teaches above I have to be honest with myself and evaluate my incorrect actions.
Is this going to happen again? Probably but everyone can learn, even me. We’re doing our best to communicate with you here, on LinkedIn and on The Ticker. The Ticker is designed to teach those who want to “actually” learn. That’s how to become the “best damn investor or trader” you can be especially at our ‘introductory’ price of $247.00. I know for certain however that everyone wants to be part. We’ve created a community at The Ticker that’s “free”. That is right, it’s set up to be “free” and over the next few weeks and months “y’all” are going to hear more about it. Stay tuned and watch your emails for an invitation to join.
In 1967 the Beatles released “A Day In The Life”, a collaboration between McCartney and Lennon. It’s message rings true today, especially with what’s happening in today’s world. Last night the lyrics filled my head. I “got up, got out of bed” and just watched the world turn. In a way I “went into a dream” asking myself whether this reality was happening or was I making it up. Lennon grew from these lyrics into the “pacifist” he became before tragically leaving our world. His works were tremendous. Just imagine if he had lived longer.