Traders biggest enemy :HOPE

Hope in reality is the worst of all evils because it prolongs the torments of man…Friedrich Nietzsche

Take an old pair of jeans and cut a hole in one of the pockets. Now, start pouring sand into that pocket. What happens? Sand runs down your leg and to the ground. What do you do? Keep pouring until the sand is up to your ankles? Your knees? Your waist?

At what point do you realize and act on the fact that no matter how much or how fast you pour sand into the empty pocket, you have a hole in your pocket? When do you come to the conclusion that you either have to stop pouring sand or just throw your pants on the ground and run away as fast as you can?

Sadly, many of you will keep pouring until you are up to your neck in sand. Suddenly, it begins to feel like quicksand and you are trapped–can’t or won’t get out. At this point, you feel like you are being pulled down into the quicksand, unable to breathe, choking and suffocating in the murky slime.

This is how it feels to lose. The hole in your pocket is the losing position. The sand is your mental, emotional, physical, financial and spiritual capital pouring out until you are drained, have nothing left to give and are literally sinking in a quagmire of your own creation. The pain of loss is excruciating, like a knife stabbing through you. Everything feels quite different when you are in a losing position. The experience of time changes and seems to slow down to a snail’s pace. Physical health deteriorates due to the outpouring of stress hormones that weaken your immune system. In the same manner that going long in the markets is not the inverse of going short, losing is much more than just the absence of winning.

 

 

 

The feeling of losing is persistent, relentless and devastating. It eats away at you like a cancer that metastasizes to every part of the body, killing one cell after the other. If it is not contained, losing truly feels like death. How does deterioration of psychological and physical capital with focus on a losing position manifest itself? Irritability, sleeplessness, continual searching for something or someone to affirm your position (confirmation bias), anxiety and dysphoria, tick-itis (the toxic habit of watching every tick of the position day after day), rumination, self-deception, impairment of social and family activities and a litany of other unpleasant emotional and physical states. Perhaps the worst aspect of this is the spiritual decay that manifests as self deception and lying to family and friends. One is rarely capable of owning true feelings of guilt, shame and inadequacy and shifts into a mind morph where a failed trade becomes a hold and hope investment.

Of the gamut of emotions that flood traders and investors on a daily basis, the most risky is hope. It borders on delusional to believe that the markets are kind, loving and give you money if you just keep your pants on and hang in there. If this is what you are thinking, it might be a good time to reassess why you are in the financial markets– among the most cruel, bloody and dangerous games that humans play.

The most rigorously honest thing that I can say in response to this type of thinking is: abandon hope. As extreme as this may sound, it is the only way to be consistently successful. Attachment to a losing position is a recipe for more misery and illness than any one of you deserves. Eschew complacency and mediocrity, both in trading and life. Cut losers quickly and do not sit around waiting for the markets to rescue you. 80% of all traders are out of the game within six months because they don’t have the discipline to manage risk by cutting losing positions.

Who can say what is waiting for you at the bottom of the slippery slope of hope? Stop pouring sand into the hole in your pants before it is too late. Suffering is optional and you are in control. Take your power and use it to make yourself strong in the service of living and breathing with freedom to play another day.

 

The trouble with most people is that they think with their hopes or fears or wishes rather than with their minds… Will Durant (American Historian and Philosopher…1885-1981)

 

Janice Dorn, M.D., Ph.D.

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