Winning Mindset for Losing Markets

Traders are preoccupied with winning. It’s the raison d’etre for getting into this rather odd profession or avocation in the first place.

But unlike most other professions, this one has a paradoxical twist to just about everything that one undertakes. In regard to winning, for example, it seems that we first need to learn to lose. If we never learn the right way to lose, then winning will always mean too much and like any exalted goal, it will tend to be elusive.   

Learning to lose properly is not easy. Losses are painful and we have to get used to the pain. There’s a saying in the personal growth field: What we resist persists. If we resist losing we usually end up trading-not-to-lose, which is a breakeven strategy at best.

Trading is difficult because as many researchers have shown, humans are simply not rational when it comes to money. One reason money matters more than it should because our brains are hardwired for survival and in the modern age money holds survival value. Money is also bound up with  self-esteem and self-worth. When people fight over money it’s important to find out which value or set of values is really at stake, and this applies to trading, as well.

For example, one wealthy trader I coached was very stressed out when, during a trade along, he lost $100. For him, a loss meant he was wrong and he could not shake this idea. As an entrepreneur and former CEO, he was accustomed to being the boss and being right. When he was trading, therefore, his pride was on the line. Although he had sold his company, he was still operating from the corporate state of  mind.

William Eckhardt put it this way: “While amateurs go broke by taking large losses, professionals go broke by taking small profits.” If you are among the folks in the middle, you are learning to take losses while they are small, which is the key to long-term success, but there’s one caveat… you can’t be afraid of them.

Once you get to the point where you are genuinely happy to take small losses, you are well on your way to a winning mindset. (Assistance for private traders.) (Peak performance consulting to RIAs, hedge funds and banks.)


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