Being Stubborn Will Cost You Dearly

Over my trading career I have had my share of big wins and losses. The victories are often very sweet and rewarding but it is the losses that are most remembered.  Even to this day, I can remember painful trades and investments that happened twenty years ago.  It's hard to just walk away from a big loss and eliminate it from your memory, at least for me. Losing money is embarrassing and demoralizing to many of us.

Perhaps the best thing I can say about lingering losses is it provides a good lesson for the future if it requires a behavior change. Yet, it's only a good teaching moment if I am able to make the change next time around.  But what if I cannot do that?  Well, that opens me up to unnecessary losses and eventually a drain on my capital. I can choose noy to be stubborn and not make the same mistakes, but it takes effort and recognition to do it.

Most of us are stubborn when we trade and invest. One thing gets in the way of our decision-making function, that is our ego.  Oh, we like to think the ego is not part of it and that we learn from our mistakes, but when our money is on the line and the outcome is uncertain, we tend to hold on tight, refusing to let go of our beliefs. Especially at moments when they are wrong.  

It's easy to see why this is the case, right?  If we are in a losing trade or even book losing trades, the pressure starts to build on getting back those losses. But what did we do wrong? That's not being asked any longer, rather the result becomes more important than the process. We don't want to lose more money the next time around, but we fail to see what went wrong in prior situations and refuse to make the adjustment to win. We tend to repeat the mistakes over and over and eventually it will cost us our accounts. We don't learn.

Fortunately, we can arrest the problem by making the right changes. For me, when I am faced with a loss or a have been on a bad streak, I tend to stop trading for awhile.  I need to think about what I'm doing, slow it down, review my process and refine if necessary.  I'll take a timeout from trading for a couple of weeks, do some reading about trading, and then do some heavy writing about trading, too.  

I need to re-invigorate my trading and find something new and challenging that could work.  I'll usually do some paper trading before getting back into the game, making sure my head is right, feeling confident but not too bold.  Before you know it, I'm back in the game finding the trades that will make money with a renewed energy and spirit. 

Follow these steps when you get into a bad trade or a slump.  You'll find your results will turn around in your favor.