Learning To Let Go
If you’re like most traders, you struggle with losses.
Your emotions play tug of war in your mind. Losses are
a fact of trading, however. Even the best setups and the
most reliable methods are not foolproof. Market
conditions change, and the method fails. Your mindset
isn’t just right, and you make a few trading mistakes.
There are many reasons for trading losses.
In the ever-changing markets, one must learn to accept
losses, and just move on. But that’s much easier said
than done. It’s easy to say that one should be ruthlessly
detached, trading the markets in a cold and calculating
way. But the fact is that when you face a string of three
consecutive losing trades, for example, it’s hard to just
put it completely out of your mind. Somewhere in the
back of your mind, you’re thinking, “I’m losing money
here; can I really put up with a few more losing trades
and still survive?”
Depending on your experience, the answer to this
question can range from, “I know it’s just a temporary
setback” to “I have a strong suspicion I’m washed up.”
If you’re the type of person who has trouble truly
believing that you can accept a drawdown with a
happy-go-lucky attitude, you’re not alone. There are
actually many traders who do, indeed, have trouble just
shrugging off a loss, especially novice traders.
They persistently mull over the loss, playing it over and
over again in their heads until they find themselves in a
bad mood, which intensifies as they continue to mull
over their losses. Some people can’t stop and because
they can’t, they are less satisfied and confident. They
have trouble committing to trading plans compared to
non-ruminators. They are so wrapped up in rumination
that they can’t think clearly or solve problems easily.
Such an approach isn’t conducive to skilful trading,
however, were a calm, relaxed, and focused problemsolving approach is crucial.
People differ on the extent to which they ruminate.
Some people don’t ruminate at all; they avoid thinking
about losses or failure, or they vent their
disappointment and frustration to friends and confidants
in order to feel better. Whatever strategy they use, they
don’t dwell on their failures very long. They just accept
them and move on. Ruminators, in contrast, repeatedly
focus on the meaning, causes, and consequences of their
bad moods. But sometimes after a losing trade, there is
no meaning to glean.
It doesn’t help to feel paralyzed by over-analysis. It’s
imperative to learn to accept losses and just move on. If
you are stuck mulling them over and over in your head,
you can’t move forward. If you’re a ruminator, it’s
essential that you gain awareness of it, and make every
effort to minimize its influence. Self-awareness is the
key to the solution. Once you know you have a problem
with rumination, self-monitor it, gain awareness of it,
and develop a plan to manage it. It’s not easy to change
since you’ve probably developed the habit of
ruminating over many years, but this tendency can be
controlled.
Carefully monitor your thought processes, and when
you find yourself ruminating, remind yourself that by
doing so, you will intensify your bad mood and that in
turn, will interfere with your concentration, and reduce
your ability to think of creative solutions to trading
problems. Some psychologists suggest that ruminative
people should immediately yell, “stop” when they find
themselves ruminating. This usually halts the repetitive
and incessant need to over-analyze a problem or failure.
In contrast to a non-ruminator, questioning one’s
decisions and over-analyzing them isn’t productive, and
it is necessary to remind oneself that he or she is
making no progress by doing so.
Over time, and through practice, it’s possible for a
ruminator to take quick and decisive action, instead of
being paralyzed by a recent trading loss. So if you are a
ruminator, don’t make trading losses worse by dwelling
on them too much. Keep in mind that even the best
traders must face losses, and oftentimes, there isn’t
much to learn from a trading loss. Don’t overanalyze.
Just accept the loss, control your risk, and keep moving
forward. If you’re using a reliable trading strategy, it
will “kick in” eventually and the law of large numbers
will work in your favour if you make enough trades.
All you have to do is keep moving forward, rather than
needlessly worrying. If the method is unreliable,
worrying about it isn’t going to help matters. Find a
new method if you need to, but whatever you do, stop
ruminating.
https://zerodha.com/varsity/chapter/learning-to-let-go/