Have you ever turned a trade into an investment?
No, I’m not talking about on purpose.
I’m referring to when you hold onto a stock position because you’re too stubborn to take a loss or hope it will “come back” for you.
I don’t know about you… but every time that happened to me the stock position I was in would get worse and worse until I finally pulled the plug on it.
“Markets can stay irrational longer than you can stay solvent.” ~ J.M. Keynes
I agree 100% with Keynes… Can you believe he made that statement in the 1930s well before computers, the internet, and fake news?
What is it with us and always wanting to be right?
While I’m not a doctor by any stretch of the imagination, I can speak for myself and the encounters experienced:
- I was addicted to the instant gratification—a vicious shot of dopamine rushed straight to the brain
- I would take losing personally—and question my self-worth
- I would be embarrassed because of the lack I discipline I exercised
Would you rather be right, or would you rather be a profitable trader?
If I have a strategy that wins 80% of the time and makes $1,000 profits on each winning, but lose $2,000 each time I’m wrong, guess what?
I’m trading that strategy!
The strategy yields a positive expectancy.
(8 x $1,000) = $8,000 + (-$2,000 x 2)= -$4,000
After ten trades the result should be a positive $4,000.
If you have a strategy that is repeatable and it has a positive expectancy—you don’t change your game plan after a few bad trades—you let the numbers and percentages work themselves out.
You can flip a coin three times and it can come up heads each time.
But if you toss it up 100 times, then you’ll probably closer to 50%, and the more you flip, the closer it will get to the mean.
That’s just simple math.
Whether it’s sports or a high-performance activity like trading, focus on execution to aide in overcoming a slump and negative emotions.
Elite performers will encounter dry spells and losing streaks—but they work hard to limit the negative thoughts that circle around their minds.
- The Oakland A’s: Matt Chapman was dealing with a batting slump (3 for 28), but kept focus and bailed his team out with a home run against the Angels last Wednesday.
- NBA-MVP, Steph Curry: once went 0-11 shooting from the three-point line in a game. However, he’s still regarded as the best shooter behind the arc.
- Poker Legend, Daniel Negreanu: understands the probability of each hand combination in poker, but he also knows it’s a numbers game, and bad beats are part of it.
Keeping a journal and tracking your results is one way to build confidence. The more confident you are with the strategy and plan— the more likely you are to stick with it.
I know we live in a world of likes, shares, views, and thumbs up… but don’t bring that mindset to trading.
Trading is about making money—not an ego stroke.
The only thing that limits your earning potential is your imagination.
Want to know how I personally handle trading losses and deal with negative emotions?
Check out this video below that I posted on Facebook:
I’m on pace to have my best trading performance ever ($500K+ and climbing)!
In the video below I discuss the changes I’ve made to level up… and share my best tips on how I think you can too.