Mind Over Markets
Control & Conquer your Mind to Win in the Markets!
Trading or investing is so exciting that it often makes
amateurs feel high. But I hope you realize that nobody
can get high and make money at the same time.
Emotional trading is your own worst enemy. Greed and
fear are bound to destroy any trader or investor. It
would be more profitable for you to use our
newsletter services instead
of trading on gut feeling. Conquering your emotions of
fear and greed will help you on the road to untold
riches.
Below are some tips and articles to help you conquer
your emotional demons of fear and greed and master the
markets. Visit this page regularly for new updates.
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How to handle losses in trading!
To your surprise, you've just lost Rs10,000.
Naturally, you feel guilty and angry. You wish it
didn't happen. You try to justify it: "It's just the
tuition you pay to become a master trader. You need
to go in expecting to lose. It's the nature of the
game." As useful as these statements are, though,
mulling them over isn't helping today. You think,
"Rs10,000 is a lot of money. I can't just write it
off, consider it a minor setback and move on." As
hard as it is, that's what you have to do. As a
trader, you have to think of the big picture, and
hope that if you work hard enough, and make enough
trades under the right market conditions, you'll
come out ahead. That said, it isn't always that
easy. The dynamics of risk aversion and loss run
deep.
Do you have trouble taking a loss? You are not
alone. Large corporations have trouble taking losses
too. Behavioral economists have shown that companies
go bankrupt rather than admit that their corporate
identity and business plan need reworking. Bankers
refuse to write off bad loans because they don't
want to admit to their superiors that they
mistakenly lent it to people who were a bad risk.
And institutional money managers leave losses on
paper because they are afraid to own up. As a
short-term trader, the losses you take may be a fact
of life, but that doesn't make them easy to handle.
Feeling guilty over taking a loss isn't irrational.
Indeed, it's been adaptive throughout human history.
There's a strong biological urge to protect yourself
and your loved ones. For tribes of hunters and
gatherers, it meant obtaining food and shelter and
protecting those resources from loss. In modern
times, it means having enough money to pay for food,
clothes, and housing. So when you lose money, even
as a professional, active trader, it hurts a little
when you think of the resources the money can
purchase. It's adaptive to think in these terms. It
was part of your upbringing. Your parents and
teachers taught you to protect yourself and your
family, and to do that, you needed to make money and
save it. When you lose money on a trade, you
naturally start to feel guilty and a little
panicked. It is as if you are unnecessarily risking
your safety and that of your family. It's quite
understandable, but if you would like to e a
successful professional trader, you must change your
thinking regarding this issue. You must fight
against your natural inclinations and learn to take
losses.
So how do you beat out years of upbringing? First,
admit that you feel guilty and why. You're guilty
because you are taking a risk that may inadvertently
harm you or your family. Admitting the potential
adverse consequences helps. It's hard to take these
responsibilities lightly. For example, it's going to
be harder to accept a loss if you really need the
money to pay for basic living expenses, rather than
money that is set aside for trading. Ideally, you
should only trade with money you can afford to lose.
If you know that you've done everything to minimize
risk and you truly know that you can survive a
worst-case scenario, you'll be able to take a loss
more easily.
You should also address the psychological side of
accepting losses. First, put the money you spend for
trading in a different "mental compartment" from the
money you allot to your personal life. Second,
identify and refute assumptions about risk and loss.
It may be useful to make a list of justifications
that you can read after you have lost:
"Losses are a business expense. It's like a personal
investment in your trading business.
It's like paying tuition in order to learn important
trading lessons."
These sayings may not work at first. It's hard to
change your expectations over night. It takes
practice. That's why you should actually write down
these sayings about losses, and read through the
list when you feel guilty about a loss.
Losses are a fact of trading life, but they can
be difficult to accept. You're fighting against
natural, adaptive inclinations. By taking proper
steps and subscribing to our
newsletter services
which include effective risk control techniques you
will be able to cope with losses, learn to take them
in stride, and trade calmly, effortlessly, and
profitably.
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