Trading Depression; Does It Affect You?

Do you admit your trading losses? Do they depress you?

Believe it or not, losing is not only essential for your health and wellbeing, but it is actually vital to your longterm success as a trader. You see, ‘losing’ trades are no more inseperable from ‘winning’ trades as the moon is from its reflection in the lake. Neither can exist without the other…

If you have ever experienced a trading loss, you’ll know exactly what I mean by the end of this post.

Last month I made a healthy 60% return on my initial £500 investment. After I cashed it all in and closed down my trades for the end of January, I felt a sense of pleasure that January was done and dusted and I’d outperformed my 30% return target (subscribe to my private mailing list if you want to see my actual trades at the side over there ->).

But, by feeling this sense of pleasure I’d made a fatal mistake. I’d been drawn into an emotional game of tug of war with myself that was only ever destined for one outcome: trading depression.

If you’re a regular trader, you’ll know exactly what I mean.

Trading depression is the only possible outcome if you allow yourself to feel any sense of pleasure or happinness from a good trade. Inevitably, you cannot, no matter how good you think you are, avoid the other side of that same experience – the losing trade.

My most recent losing trade happened at the beginning of February.

If you read my blog often, you’ll know I have a thing for high risk trading. Well, last week I played a high risk hand and got burned. The trade itself is not as important as the lesson behind it, but for curiosity’s sake, it was a gold short that scared me out of position – actually, it wasn’t the short itself that scared me, it was listening to all the clutter and noise from everywhere else instead of my gut.

If you subscribe to my list, you’ll see the trade first hand.

Anyway, instead of shrugging my shoulders and being completely unnaffected by very short-term events (US non-farm payroll data and market’s reaction to it), I panicked and cut my losses as the trade appeared to turn against me. I took a £300 loss and subsequently got pulled into the other side of that tug of war game.

Two things happened to me then:

  1. I got annoyed and emotional.
  2. I closed the laptop and didn’t look at my spreadbetting account for a few days.

Why Traders Need Losses

During my days away from the gold chart (remember I’m only trying to trade one market), I started to level out again and was able to enjoy some time with the family. I made every effort to sail that ship and throw myself into it and can happily say that I had a blast with my wife and 18 month-old son, Will.

We weren’t doing anything special, just simple stuff like having a walk along the beach, buying new shoes for Will and just enjoying spending time with each other. I made sure that whilst I was doing this, I left everything else behind and just focussed on us. No jitters or mind-wandering back to my office or anything else.

Having this time out on the back of a ‘losing’ experience, which itself came on the back of a ‘winning’ experience was the most perfect thing that could have happened. It made me see that not only was the losing feeling inseperable from the winning feeling, but that something very important had taken place aswell.

I’d been rebalanced. My feet were back on the ground and my head was clear again and like a beaming bright white spotlight in the dead of night, I realised something.

If you hold onto the idea that you can have ‘winning’ trades and ‘losing’ trades, and that they are seperate events, there is only one outcome for you: trading depression.

Remember that up means nothing without down, left cannot exist without right, light is just a word until you’ve experienced dark and, likewise, you will not know a win unless you also have a loss.

But you’ll probably have realised by now that this is not an answer to how you can grow your own capital, so for the sake of not letting you feel cheated by this post (because you had the courtesy to read all this way), and to help you avoid your own bout of trading depression, here’s the action that is the outcome of all of these spontaneous events.

I’m going to leave all of this bullshit behind and forget the concept of winning or losing and just think about trading in its entirety. I won’t be swimming against any currents or running into the wind and as soon as it feels like I am, I’m going to get out and move on – and you should too.

Trade what you know, when you feel the time is right and always with the wind. Don’t listen to clutter, always go with your gut. In the end, it’s only ever got your best interests at heart.

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5 Replies to “Trading Depression; Does It Affect You?”

  1. “Remember that up means nothing without down, left cannot exist without right, light is just a word until you’ve experienced dark and, likewise, you will not know a win unless you also have a loss.”

    Hey Lee, your article has got lots of food for thought!

    So, everything is connected, nothing can exist without the other. You haven’t been studying Buddhism by any chance? 😉

    Non-dualism is an interesting concept too, widespread in the East but a little difficult to our Western minds. I like the idea in respect to the concepts of “right” and “wrong” in trading. These terms are heavily tied up with the ego, and trading without ego seems like a freedom to me.

    Freedom to do what feels right, without the mind worrying about what the ego thinks.

    That’s why your article struck a chord. I love your idea of leaving the concepts of winning and losing behind, sounds fun! I look forward to reading how you get on.

    Maybe Zen Buddhists would make the best traders! Shhh, don’t tell anyone 😉

    Catch you later

  2. Hi,

    Great, glad you enjoyed it!

    Actually, I try to keep an open mind with everything and although I’ve read aspects of Zen Buddhism, recently I’m probably more influenced by Taoism – although more from a philisophical view point than a spiritual or religious one!

    The markets, like life, are simply unable to be tamed, no matter how good a trader you seem to be so it makes perfect sense to me to try and master the art of just going with them rather than against them.

    Also, of course, to accept that to ‘win’ you must also at some point ‘lose’, therefore you cannot have one without the other. I think understanding this…no, believing this, or accepting it…will contribute a lot towards being able to calm your mind so that you can act more intuitively to trading situations.

    For example, right now I have no positions, I was stopped out of gold long yesterday – my own fault for going against the trend – and I’d like to get back in short, but I’m not sure where. Thus I’m stepping out of it all, with no sense of urgency to have a cup of tea instead and will wait until something shows up.

  3. Hi Lee

    Great post and a well presented website.

    Over time as a trader I’ve learnt to disassociate the ups and downs of my emotions with the fluctuations of my equity curve. It’s important to feel good about making trading decisions executed in accordance with my trading plan. The market will reward good and bad actions, but by executing the trading plan there’s confidence of making money over time, providing the system has an edge.

    Cheers Rachel

    1. Hi Rachel,

      Being able to disassociate your emotions from the market is definitely a skill that takes great mastery of your own self and (at least it seems to me), that very few traders ever manage to properly achieve it.

      The point about rewarding good and bad actions I completely agree with and is in actuality the only way the market can work. There has to be ups and downs, win and losses and bulls and bears or else how would we ever move forward or distinguish one from the other!

      I also think you nailed it with the point about execution. If you execute properly and trade well, you will make money.

      Thanks for the comment!

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