Many traders are making profits during these volatile times. Are you? In many ways, it takes the right mindset to profit. While the media covers possible downturns, the winning trader astutely anticipates when the markets will turn on good news and fall on bad news. It can be frustrating. But exciting too.
Many traders say they like the thrill of competition. Trading is fun. And even though trading coaches preach the virtues of trading in a calm, rational manner, many are attracted to the excitement of the trade. You can get a pleasant rush when you execute a trade and a sense of accomplishment when you win. But with the thrill of victory can come the agony of defeat, especially when you have wrongly anticipated where the markets will go next. But it is vital to handle defeat, and know how to come back from behind when necessary. Winning traders don't dwell on past mistakes or what could have been. They look toward the future and believe that they can put in a heroic effort and turn even a major setback into a victory. The more you can learn to accept defeat, the more profitably you will trade, especially in volatile markets where a bullish market is likely to turn bearish with the latest economic forecast.
It is much easier to take risks and feel optimistic when you are ahead of the game. When you have plenty of extra capital, for example, you aren't afraid to risk money since you know you can afford to lose some of it and still trade. When you are down and must trade aggressively, however, it is hard to muster enough optimism to get you through. It is natural to feel a little afraid. Perhaps it isn't the actual loss we may experience that is so bad, but the feeling of dread and regret we feel after we have lost. We mull over what we could have done to prevent the loss. Behavioral economists say that such feelings of regret are so powerful that traders close out trades prematurely and make other trading errors just to avoid such unpleasant feelings. Despite these potentially debilitating feelings, there is much you can do to accept and recover from defeat.
Defeat is especially hurtful when we don't anticipate it. If you get your hopes up, only to have them unexpectedly dashed, you will feel particularly down and out. If you anticipate a loss, in contrast, you will not be as disappointed. "Go in expecting to lose" is what some traders say. When you go in with this attitude, not only will you be able to anticipate a setback, but you'll also take precautions to minimize the impact of the potential loss. For example, you'll devise a detailed trading plan and control risk when you face the possibility of a losing trade. The way you look at losses can also help you recover from them. If you take it personally by putting your self-esteem on the line with your money, you will ding your ego. But if you take an "it is just business" attitude, you'll be able to more easily objectify the trade and its outcome. Similarly, if you view a loss as evidence of your incompetence, you will naturally feel beaten. But if you look at a loss as a learning experience, a way to grow and a way to build up your trading skills, you will welcome a loss. Seasoned traders look at a series of losing trades (assuming the losses reflect a problem with an outmoded trading method) as an intellectual challenge, a puzzle requiring a solution. When you view a setback as a problem you can solve creatively, you will be less bothered by a setback. Finally, it is vital to take an active, problem solving approach, rather than passively wallowing in self-pity. More limited psychological resources are wasted worrying about the implications of a setback than just facing it head on and actively devising a solution.
Feeling defeated is a state of mind. You never need to feel defeated. You may feel a little down at times, but you are never beaten if you refuse to give up. Cultivate a fighting spirit and never let a setback get the better of you. In today's markets there are many opportunities. Winning traders are those who take setbacks in stride and move on to the next possible opportunity.
From MarketWise:
Regards,
Elias
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