Avoiding losses is the wrong approach

Experiencing the pain of a loss in trading is a mental dilemma. We are supposed to learn from defeat as in analyzing mistakes. The pain of losses puts our brain into a passive mode and learning gets disabled. Instead we try to avoid pain all together rather than dealing with it the next time. Now, I am able to observe this in my actions. I am not able, yet, to control and overcome my pain with appropriate measures. The knowledge of the next step is present and it takes more effort (and money) to advance.

Twice this week I did big trading mistakes and it cost me a lot of money and stress. I felt very uncomfortable right at the beginning when both trades started to go wrong, but I did not get out of the clearly unfolding situations that I recognized as errors. I said it to myself: Get out! But I didn’t. I made it worse by adding to loosing positions twice. At the end I was stopped out. Just 2 point before the market reversed in both cases. I continued trading and lost more (another mistake).

The trigger for my bad decision was hope. This strange 4 letter word that describes behaviour of people who are scared and desperate in moments when their own actions can’t help them anymore. I was wishing to avoid a loss. I did not like to experience the feeling of pain.

And that hope for avoiding pain prevented me from taking the steps I needed to take: Accept a small loss and move away from what I was doing.

When the trade went wrong I believed I had missed the valueable opportunity to get out with a minor loss. It was so obvious that all that was inside this trade was break even at best.

In past expiriences of similar kinds – they happened more often than I can recollect – I would turn away from trading and relief my stress with exercise, alcohol or other distractions. I sought relief by assuring myself about technical errors and bad luck. Nevertheless, situations like this one, specially when money is getting tighter, gave me a dminished feeling of self esteem. It is impossible to take responsibilty and make a learning experience out of a painful failure.

In the meantime I have advanced my tools to some degree. Today, I can say, what I am observing my own actions and lack thereof. I can observe myself and put value into this experience. The value being the ability to learn from it by writing down my experience and recording my emotions along with it. It is different from keeping a trade journal where numbers, market levels and entries are recorded. The stress and emotional response to my trading mistakes is a different matter to learn from. Usually, I forget about that pretty quickly and all that remains left over are numbers. All emotions experienced during the painful mistakes evaporate within minutes and the triggers of emotional stress remain undiscovered.

In life I sometimes freak out about small injustices that bother me. It would be easy to put them away or find a verbal remedy during a confrontation with some person who just gives me hard time. For reasons beyond my explanation I try to argue with them and when I don’t win the argument it bothers me as a loss for the rest of the day. The frustration about a loss captivates me so deeply that I can’t stop thinking about it even when there is nothing I can do to change it and a similar situation will most likely never occur again. In some cases I force myself to think about it over and over again for no plausible reason.

Example: Recently, a security guard in a grocery market would not let people enter the market without a cart. I tried to reason with him, but he would rather upset me than let me buy a lottery ticket. I walked away to another store, but the argument bothered me for the rest of the day. I felt diminshed because I wasn’t able to charm the ordinary guy into letting me inside and make his company some revenue.

I have to learn how to empty my mind and leave minor issues behind me. They can’t be changed, they can’t be solved and every thought is a waste of time. Wim Hof’s methods for breathing and a cold shower are one thing to do when possible. I need to find more possibilities for such lows to resolve in better outcomes.

Another thing I lost while being under stress was the possibilty for “anything to happen” or the karma part about the market where everything can be taken. This thought never even crossed my mind. I was totally in denial of any adversities.

Another trigger for stress was again my desire to point-and-click-trade the markets while watching them closely. This has somewhat disturbed me many times in the past. Prices moving up and down don’t instill calm. They create nervosity and draw both, my mind and my body into uncertainty. This uncertainty makes me do silly mistakes such as changing plans, trading against my direction and opening further positions for the sake of acting rather than just sitting there. It might be wise to deploy trading techniques which are set-and-forget and walking away from the machine. I would very much like to think about that.

At the end of this I would like to conclude that my main problem lies with execution of a trade plan. Deviating from a plan when things get messy is a mistake that happens a lot to me. It is pretty easy to determine a good entry and it is also easy to calculate the risk for a possible loss with a forced exit strategy. I just need a bit more self-discipline to wait for it to happen without letting fear of missing out creep into my mind.

Another habit I need to give up on is making a trade here and there for small change. At the end the efforts are not worth the trouble. Holding back rather than acting is the credo for the future.

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