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:
- I got annoyed and emotional.
- 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.