Trading and life has a way of relating to each other. Those that are in pain have one thing in common. Their first instinct is to seek comfort. I know this from my own experience. I have waited to have the tough conversation. I did not stop my behavior or their behavior. I was not strong. It made the hole deeper. I traded too much. I did not stop because of last weeks hole. That is not to say you should run a marathon with a broken leg. That is always bad, but the very moment you are healthy enough, it is time to go.
One of the key differences between good and bad traders is the volume they do on a bad day. A bad trader’s volume will increase when they are down and a good trader decreases. It is easiest to see or make up opportunities when down. Trading is opportunity and opportunity is comfort. Don’t get me wrong, trading your way out of a hole is an important skill. But it should be used sparingly. It gives a sense of accomplishment instead of focusing on why you are in that hole in the first place. A winning team sees no problems, a rallying market hides weaknesses. It always, I mean always, catches up with you.
Conversely, a good trader will trade more on their best days. They are doing it for a reason, not out of necessity.
Not trying to sound self righteous, I have failed many times, I am sure to fail again. When in this situation I ask myself a few questions. Am I seeking comfort? Is this the right time to seek comfort? At what point will I no longer seek comfort? A bad situation does not become better more often than we just get burnt out. When that happens we get use to it, it creates a bad habit. Trading is a little different because it is easy to not trade. But it is not easy to ignore the opportunity to get your money back. Often time you are running on a broken leg and the opportunity’s endorphin allows us to ignore it for awhile. This is why it is extremely important to have your broker set daily loss limits. They maybe hesitant to do it because a big hole means more volume. Be firm. Every wonder how an athlete can finish the game but can’t play the next one? At times it makes sense to play injured but you always have to pay for it the next game.
Above all, everyone’s situation is different and personal.
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