Trading Tip #12: Had a Bad Trade? Handle it Like a Bad Golf Shot. It is Your Fault. Deal With it Quickly and Always Move Forward.
One issue that holds back most new traders, and separates the good traders from the great traders, is the ability to move forward after a bad trade. How many times have you heard someone say, “I lost money the market when it went the wrong way. I should not have listened to my broker. This guy said the stock would go up I am so pissed I listened to him, I actually meant to be long”?
As a trader, you need to own your trades. No one has a gun to your head to put on a trade. It is nobody else’s fault if you lose money. When you are out talking to your friends about a good trade, do you then give credit to someone else? No, of course not. At those times, you are the superstar.
The bottom line is this – You made the trade, and it was wrong. It is not a big deal, and you need to just get over it and focus on your next trade. Sitting there being upset and thinking about it over and over will not get you the money back and cost your more in the future . Lets use golf as the example for this blog post . You ‘re at the first tee getting set to tee off and bam you hook it out of bounds . So you put another ball down are you going to let that screw up the rest of your day?
Trust me I know all about bad shots in golf as a “C” player I am not good, but I am fun to play with since I am fast and really feel any day out on the course is a good day. I remember when I was in the “C flight” championship round and I was down 9 holes going into the last round on the second day. My caddy looked at me and said, ‘Looks like it is over.’ I looked at him and said, ‘It is not over until the fu##ing bell rings. Let’s take it one shot at a time.’
The guy I was playing against was getting pissed off at every shot. I could see he was not handling the pressure well. I know he had set up a victory party for that night even before he had won. The pressure was getting to him. Going into the 18th hole, we were tied, and I had a 15-foot put with a huge up left to right break, but he was just 2 feet from the hole. My caddy walked up the hill and said, ‘Just hit it to my feet.’ His feet were about 10 feet to the left of the hole. I hit the ball; it rolled up the hill, then starts turning right, then rolls and drops right into the cup! Everyone on the 18th went nuts. My opponent, who was the guy I played with most weekends, stood over his ball. I could see he was thinking of all his screwed up shots and was standing over the ball way too long. He pulls the putter back, and I could see his arms stiffen up and he hits the ball 3 inches to the left and a foot past it. The pro said while giving out the awards that it was the best come back in the clubs history or it the biggest melt down he had ever seen . I like to think of it as the best come back ever (a trader’s ego).
The moral to the story? When you trade, treat each trade as a new trade. The one before – winner or loser – doesn’t matter anymore. No matter what, always move forward and reset, reload and trade.
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Ideally, a trader could do this “When you trade, treat each trade as a new trade. The one before – winner or loser – doesn’t matter anymore”. Unfortunately the human brain is built to do exactly the opposite. Recent context creates an unconscious context that influences the next perception, judgment and decision.
Psychological science – and therefore trading psychology – is in a major state of flux. It’s is now known that emotion is required for a decision, that more than 90% of our perception is unconscious and that bodily-based experiences (like smells and the temperature of coffee) impact how someone perceives a decision.
Furthermore, it is also being shown that to actually feel those feelings – articulate them – helps one move through them in the most expeditious manner. This means that the quickest way to “get over” a bad golf shot is to say to yourself how mad you are about it. It also means that the quickest way to a better trade the next time is to experience and articulate the fear left over from the bad trade.
I am glad you posted on my site , There have been so many people that have said you and I should meet. I do not agree with your statement – there is more to life and thinking then just applied Psyc sciences. if everyone just went by what is in the science books we would wouldn’t be human there is much more to life and the way we think and how traders think . If there is one thing we have all learned is the human brain adapts and can be trained to think differently. As a crude oil trader for over 22 year I stand by my trading record as well as all the traders I have coached. However everyone has the right to believe what they want , While your statement sounds good I have been with & helped with 100″s of traders who would tell you being scared after every bad trade will crush your chances to be a great trader- I will stick to real life experiences I have found that people who just rely on what it says in books are not able to explore and find out was real life experience can teach them – all the best David
David, Thanks for the welcome. Alas, I didn’t make myself (or my 19 years of experience trading and coaching traders clear). Obviously one can’t trade when gripped with fear. The question is how does one most easily and most effectively work with that fear – or any other feeling that comes into trading.
The answers have changed dramatically in the past 20 years. We now understand the brain to work on the unconscious feeling context first and foremost. The biggest advantage this provides to traders is a way to avoid/avert the inevitable repetitive mistakes that everyone makes.
In fact as you say, this is all about learning – or unlearning – what we have been taught. In the case of psychology that has been the wrong model of how we really make a risk judgment call.
This isn’t about my belief – it’s about what I learned when I left The University of Chicago to become a trader upstairs at the CBOE, then moved to NYC to manage trading desks, then had my academic work published and decided to apply it to traders – and their response. I didn’t expect to be consulting in Trading Psychology back in 2006/7 when I spoke at CME Group and enjoyed not a single person leaving the room.
Net net – I am happy for the debate… Thanks for having me!
I think it would be great to keep the debate open and I’m a live form. We see some things differently but have the same goal in mind. Helping the traders. I have a unique back ground with my years in the crude pit as well as seeing the real results of all the traders in the clearing house. – real time , everything day. That’s how I got the nick name ” the trading Shrink “. I believe there is more to the mind then just what the books say. – and if we only follow the books were would we be today. – if you want to do a joint class together please let me know. I think it wound be educational for all