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The Greatest Trading Loss

  
  Education
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The Greatest Trading Loss

 Trading-loss

What is the greatest risk you face in trading?

 

Is it loss of money?

 

Certainly, that’s what most traders believe. I tend to disagree though. In my opinion we have something much greater at risk, that very few of us consider during the ‘learning phase’.

 

The American political journalist and author, Norman Cousins, is quoted as saying, ‘Death is not the greatest loss in life. The greatest loss is what dies inside us while we live.’

 

Along similar lines, I would argue that loss of capital is not the greatest loss in trading. The greatest loss is what we lose from within. (more…)

"The Confident Trader "

  
  Education
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Confidence overcomes fear. Confidence also overcomes greed because a component of greed is an underlying sense of scarcity. To be confident doesn’t mean that every trade or trading day will be profitable. What it does mean is that when you look to where you want to go, you know that you can figure out a strategy that will get you there. And you know you can execute that strategy in a consistent manner. A successful strategy doesn’t mean anything if you don’t or can’t or won’t employ it.

Theoretically we should be as successful at trading and investing as our trading and investing strategies. Unfortunately the vast majority of traders and investors fall far short of the results of their strategies. They trip over themselves again and again on the way to employing their methods. My work as a trading coach is to enable traders around the world to become as good as their methods.

Confidence need not waver when you have dips and troughs and plateaus in your trading. Confidence is developed when you realize you can correct mistakes and learn from failures. You don’t persist in failing. You learn and move on. You don’t fear repeating the failure either, you simply anticipate correcting it.

Self esteem is basically the sum total of all the thoughts we have about ourselves. This is quite important because we do tend to become what we think about ourselves. The noted philosopher and psychologist, William James, said, “People, in general, become what they think of themselves.” Not only did he say this but he added that this was the essence of all we had learned in psychology in the prior 100 years.

What do you think of yourself as a trader? Do you believe that your dream of excelling as a trader is possible? Do you have a set of philosophies that support your dream? Are you as good as your methods? If not, it’s time to do something about it.

Consider my coaching program. I speak for an hour on the phone each week with the traders I coach. We review your trading, beliefs, attitudes, habits, and philosophies. I help you do more of what works and stop doing what doesn’t work. Through exercises, assignments, and repetitive listening to the CD’s I send, you can become as good as your methods. The money you invest in yourself—especially in difficult times—is truly the best investment you can make. It will pay you exponentially because you never leave yourself. Call me at 800-692-0080, and we’ll discuss it.

Weekend Thoughts…

  
  Education
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THOUGHTS-ASR* Distractions come from unfinished business;
* I’ve yet to meet an impressive person who has needed to impress people;
 * Passion without commitment is wasted energy;
* The early bird gets the worm; the night hawk gets the early bird;
* Success comes when doing things right is combined with doing the right things;
 * When you are doing what you’re meant to be doing, effort gives energy;
* In trading, as in life, you succeed by acting decisively on your convictions;
* You will never win if your goal is to not lose; * Successful people are productive; they traffic in efforts, not intentions;
* Narcissism craves admiration; self-esteem desires understanding. .

Typical Symptoms of Egotizing Trading

  
  Education
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 . Not putting in stops. The ego doesn’t want to be proven wrong. 
· Hesitating before putting on a trade. The ego wants reassurance before it begins. 
· Overtrading. The ego wants to prove itself big time. 
· Getting stuck in a trade. The ego has intertwined itself with a trade and is holding on for dear life. It cannot cut out. The ego doesn’t want to be wrong. 
· Adding to a losing trade. The ego digs its hole deeper in a massive effort to crawl out. 
· Grabbing a profit too soon. The ego wants a pat on the back.

How do we separate our ego from our trading? How do we keep from personalizing a trade? How do we avoid personalizing all of our trading?

One way to separate your ego from your trading is to build healthy boundaries between yourself and your trading. Not only do good fences make good neighbors, good boundaries make good traders. 

A boundary sets limits, makes distinctions, informs you as to what is you and what is not you, makes clear the distinction between you and others, tells you where one thing ends and another begins. It distinguishes between past, present, and future. It lets you know that another’s ideas, values, and feelings are not necessarily yours. A boundary is flexible and permeable. It lets information flow back and forth. It allows you to listen actively without having to take on someone else’s opinions and without having to force your opinions on another person. In trading it draws a distinction between yourself and your trading, between one trade and another, between one trade and all of your trading.

One trader would see the signal to take a trade and before she could put the trade on, she’d hear a voice saying, “What if I’m wrong?” Immediately she’d feel small and diminished. The next step was simply to let the trade go by as she sat there stalled by her vulnerable ego. She needed a boundary between her self-esteem and the outcome of a trade. She needed a boundary between self worth and being wrong. With such a boundary she could give herself permission to not always have to be right. (more…)

Self-esteem and Trading Acccount

  
  Education
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Does your self-esteem rise and fall with your account equity? If so, your probably in for some difficult times ahead with you’re trading. For some traders, a trade is more than a trade, it can represent how successful they are as a person, how much status they feel, etc.  When your self-concept is closely tied to your trading outcomes the result is a yo-yo effect in terms of your self-esteem and your internal state.  And our internal state has a lot to do with how well we trade.

Trading already involves a lot of uncertainty, and tying one’s sense of self-worth to the ups and downs of trading is unnecessarily adding emotional volatility to the picture and is usually not a good idea.

Most traders need to work on being more resilient in the face of disappointment. Trading will always involve disappointments, its part of the territory.  A delicate balance between being fully engaged in the trade with a ‘watchful curiosity’ and without being overly attached to the outcome, is how many successful traders describe their internal state.

‘A Trader’s Self-Evaluation Checklist’?

  
  Education
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Are trading losses often followed by further trading losses? Do you end up losing money in ‘revenge trading’ just to regain money lost? Do you finish trading prematurely when you’re up money, failing to exploit a good day?

Do you cut winning trades short because, deep inside, you don’t think you’ll be able to make large profits? Do you become stubborn in positions, turning small losers into large ones?

Is trading making you happy, proud, fulfilled, and content, or does it more often leave you feeling unhappy, guilty, frustrated, and dissatisfied? Are you having fun trading even when it’s hard work?

Are you making trades because the market is giving you opportunity, or are you placing trades to fulfill needs — for excitement, self-esteem, recognition, etc. — that are not being met in the rest of your life?

3 Types of Confidence

  
  Education
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First, is what I call ‘false confidence’ That’s the person who talks big and poses like a big shot. This type of person often takes big risks in an effort to either impress others or to assuage their own discomfort, and the results are often erratic and often end terribly.

 Next, there is temporary confidence, which is conditional on recent performance. This is the person whose self-esteem is tied to their account equity or P&L.  When on a good run, they feel confident and take larger risks (often the prelude to giving it all back). And when performance is lousy they start grasping at anything, maybe exiting winners prematurely or taking on excessive risk to get their money back.

 Finally, we have true confidence. This is confidence that does not depend on recent results. It is based on a deep sense of inner trust. This is the person who has a history of doing the right thing, regardless of the outcome. Doing the right thing in the sense that they act in their own best interest and trust and understand that doing so over time has a positive impact on results.  The trust runs deep enough to provide resilience in the face of disappointment.  This is true self-confidence, the kind you want in trading and in life. 

Apprasing Your Trading Relationship To Pride- 10 points

  
  Education
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1.Does your self-esteem rise and fall with your latest trading ?
2.Have you ever taken a trade just to prove your ability as a trader ?
3.Do you brag about your winning trades to others ?
4.Do you try to hide your losing trades from others ?
5.Do you ever make up false stories about your trading to impress others ?
6.Do you worry about what other people  think of your as trader ?
7.Make an honest self-assessment of your trading.
8.Complement yourself and give yourself credit when you do something right.
9.When you make a mistake or do something that doesn’t serve your trading ,plan how you will correct this tomorrow or in the future.Say to yourself ,”That’s not like me.I can do better.”
10.Notice your improvement and commit to doing better each day ,week ,month ,and year

The Illusion of Skill

  
  Education
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“The illusion of skill is not only an individual aberration; it is deeply ingrained in the culture of the [financial] industry. Facts that challenge such basic assumptions — and thereby threaten people’s livelihood and self-esteem — are simply not absorbed. The mind does not digest them. This is particularly true of statistical studies of performance, which provide general facts that people will ignore if they conflict with their personal experience.”

I find that, unfortunately, to be terribly true.

For those of you who may be unfamiliar with Kahneman, he is a professor at Princeton and Nobel laureate. He is notable for his work on the psychology of judgment and decision-making, and behavioral economics.

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