In the simplest of terms, a trade can be boiled down to the basics of being a 50/50 proposition. Your position is going up or it’s going down. You’re right or you’re wrong, maybe for a little while, maybe for a long time, or maybe permanently. Add to those 50/50 odds a dose of trading knowledge, tools and experience and the odds should then be skewed in your favor, yet so many still fail to find lasting success. Perhaps the most vexing aspect of trading failure comes when a trader realizes that regardless of how simple trading may have seemed at some point, and despite everything that should work to his advantage to beat the markets, he’s still in the loss column. The more a trader thinks he knows, the higher his expectations become. When performance fails to meet those expectations, frustration takes hold.
I speak from experience, of course. I’m about to begin my fifth year of trading and I am still in the loss column overall. I’ve read books, studied successful traders, gathered a great deal of trading experience first-hand with real money. I’ve executed magnificent trades. I’ve endured gut wrenching failures. Sorting it all out, the end result is that I’m still not where I want to be, and I’m certainly not where I thought I would be after four years of plugging away at it. It can all work to increase pressure to obtain results which can lead to overtrading, revenge trading, and all other manner of ill-conceived and rash decisions.
Pressure From Within
Pressure is the key word of my day here. To my advantage, my trading capital is discretionary. If I lose it, I am not in danger of harming my financial future. That doesn’t mean I feel good about losing, but it does mean that I don’t have the pressure of having to count on it to get by. If, on the other hand, I set out to trade for a living and had to rely on trading success to earn my income, failure to do so would create a tremendous pressure situation. I’m relieved just knowing I’m not in that position. It’s good to not feel that type of pressure. It’s good to not feel any pressure.
I do feel pressure through different means though, and unfortunately it has been brought on by my own doing in broadcasting my trade performance here and on social media. For those who manage money or otherwise offer their services for personal gain I can understand why they would make their performance known, however I trade solely for my own interests. Whether I win or lose shouldn’t matter to anyone else. My results offer no value to anyone beyond me, and trying to meet or exceed my own expectations publicly creates unnecessary and unhealthy pressure. In order to remove that pressure from my trading I’ve decided to withdraw my portfolio performance updates here on my blog. It makes no sense to invite that pressure upon myself and serves no one’s purpose other than my own. I’d rather spend my blog time writing something that does offer value to others as well as myself.
Pressure From the Great Unwashed Masses
Laying yourself to bare exposes you to other forms of pressure as well. Ever post a trade you had high hopes for that went wrong? A market forecast that unfolded the wrong way? Doing so can create pressure to be right. Pressure can prompt a trader to hold a bad trade too long in the hopes of it turning around, add to a losing position, or search for reasons to justify why what isn’t working should be working. Someone coming along to point out how wrong you are only exacerbates a bad situation. Trolls and hecklers can fuel a fire of frustration that will go a long way in distracting and derailing traders from going about the business of trading. It’s a lot easier to cut a losing trade when no one is peering over your shoulder.
Pressure on Display Just Tweets Away
Seeing a problem others are having can help identify and address it to correct a similar problem within yourself.
I’ve been watching two traders who I know are surely feeling self-imposed pressure right now. One trader has emphatically been expressing his opinion that we’re at the onset of a bear market. That may very well be, but his opinion has only become louder during the S&P’s 11% climb during the past four weeks. After each leg up he posts a variety of different charts or indicators which best suit contradicting the move. He quotes other’s opinions who support his belief while contrary opinions are dismissed. It appears evident to all but himself that the pressure to be right about his bear market call has overwhelmed his bias. It’s almost painful to watch.
Another trader has spent a long time repeatedly expressing deep conviction in a stock which has now lost a tremendous amount of value. I sometimes wonder if he’s still holding on to it, then on an up day I’ll see him mention it so I know he’s still in. The chart of this stock was a screaming sell a long time ago. I feel bad, but what can I do? His conviction may be proven right at some point in the future, however it is certainly not so in the now. His desire to be proven right after so publicly expressing conviction is obviously greater than recognizing and realizing a significant loss. The last thing I ever expect to hear from this trader is, “sold for a loss.” It would be so much easier and wiser to just sell and take the loss without feeling the pressure of meeting other’s expectations.
Wiser Men Before Me
If it isn’t a sign from the trading gods then maybe it’s my subconscious mind showing me the way in dealing with removing pressure from my trading practices. I’ve recently studied writings and advice from others who have shown me the wisdom in shedding this unnecessary burden. I’ve already demonstrated to myself the benefit of being discreet. This past week I put on a short trade which has begun to go against me, however with only my eyes on it the pressure that can come from feeling the need to be right is not present. The process of the trade may now run its course without an unnecessary outside influence.
I feel as though I’m turning a corner in my trading, and the need to implement changes to my process are evident. This is the first step.
A tip of my hat to the wisdom of Jesse Livermore and Peter Brandt, among others.