Let Go of the Past

When I let go of what I am,  

I become what I might be.

Lao Tzu

What are your worst losing trades? Do they haunt you? It is important to learn from your mistakes and to the extent that you can do that objectively and unemotionally. I am well aware it is not easy, but it is often necessary to now forget about the past and think of tomorrow. Once you have learned from your losing trades it is no longer necessary or desirable to think about them. Get rid of the baggage and remove historical emotions from your trading. It is important for your long-term success to neutralize the influence of these memories. Your past doesn't need to influence your future. It only has an impact if you let it. 


When everything seems to be going wrong, it is hard not to panic, especially if you are a new trader. Your emotions may start to take over. You may start to fear that you can't make profitable trades that you just want to walk away. Your past emotional baggage can intensify these feelings to the point that you start making stupid mistakes and dig yourself even deeper into a hole. 


There is a lot you can do to put aside these past memories and start your trading anew. The first thing you need to do is acknowledge your past losing trades. Don't pretend that they didn't happen or that they have no meaning, when you actually place a great deal of significance on them. You don't have to over-analyze, merely acknowledge that you had some past losing trades and that they bother you. You need to acknowledge that you may place losing trades in the future, but you aren't going to let that fact hinder you. In addition you need to realize that your past does not dictate the future. Believing that the past and future are linked is a common irrational belief that you must refute. Remind yourself that you can take steps to overcome a potential losing trade. For example, you can limit your risk so

that you will know deep down that it is virtually impossible to have a losing trade in the future that can have any real great significance. You can also make a list of past winning trades that you can pull out and review while in the midst of a current loser to remind yourself that you can overcome your current circumstances by calming down, thinking positively, and taking decisive action. You can tell yourself encouraging thoughts, such as "It's no big deal. I can endure. I can get through this if I just calm down." 

Knowing that you have an action plan for dealing with an emotional setback can do wonders. If you know that you have a specific plan ready to put into action, you'll feel a sense of freedom. You'll know that you are ready for anything. Let it go and focus on tomorrow.

Surviving Chaos

The battlefield is a scene of constant chaos. The winner will be the one who controls that chaos, both his own and the enemies.
Napoleon Bonaparte

Why is it that some people who are very successful in demanding professions have trouble gaining confidence as a trader? Why do some people buckle under pressure, yet others thrive on it? Perhaps because markets are often unpredictable and uncertain; causing some to act impulsively, abandoning their trading plans prematurely. Traders, who are able to weather the storm to make enormous profits, have a combination of characteristics that make them winning traders.

Of course there is no substitute for experience. The winning trader has experience with the markets and with his or her own personality. New traders are very much like beginners learning a new sport, such as skiing or tennis. They haven't experienced the variety of events that may come up. They see the market as a structure of random movements. The winning trader sees structure in what others see as chaos. Over time, comes an intuitive feel for the markets. They can sense when particular market conditions have emerged and they know that the odds of success are on their side.

Uncertainty is anxiety provoking and new traders succumb to the fear. When they are ready to put on trades, they aren't calm and focused; they are scattered and afraid. Winning traders, in contrast, have experience, and confidence. They know that the odds are in their favor, and that if they make enough trades under these ideal market conditions, they will come out ahead. Since they know that in all likelihood that they will succeed, they are calm and relaxed. Of course there are no guarantees, but they truly believe that it won't be the end of the world should they hit upon a series of losing trades. Should they encounter the worst-case scenario, they know they will live to trade another day and make the losses back.

When a trader has genuine trading skills, he or she knows that there is little to worry about in the long run. He or she is never stressed out. The uncertainty and unpredictability of the markets that produces stress in the new trader is seen as excitement and opportunity by the skilled, seasoned trader. The more trades you make, the more success you enjoy, the more likely you will gain experience and hone your trading skills. It will not happen over night, but it will happen eventually. In the meantime, you might as well accept your fate and patiently wait until you build up superior skills and confidence. If you stay optimistic, working hard, you will gain valuable market experience, and survive the chaos.

From PrudentTrader Archives 2006