The 3 Kinds of Trading Pains You Need to Know

5 dic 2022

Hello everyone,

I identified early 3 kind of pains when trading/investing

Pain of missing out

How disheartening to get out of a trade and see it progressing way further leaving us with only a fraction of what we could have made.

Took me some time to make peace with the fact that banking a piece of a whole move is OKAY.

Capturing 20, 30, 50% of a trade is OKAY.

You know why? It's still more than any loss and obviously more than 0.

Pain of losing money

Basically, it's when we're either wrong on the trade direction or trade timing (= when the candles will go in the expected direction).

I feel it's more painful to lose gains aka some $$ we earned than losing some of our initial capital.
Our brains are wired that way.

It's pretty challenging psychologically to gain something and then losing it.

Think about your past romantic breakups, when you lost your sport trophy because the adversary team outcompeted you, when you give a candy to a child and then take it back... (don't do it, it's mean ^^)

Recovering from a catastrophic loss took me multiple months - I was disgusted of trading - I didn't want to open my trading terminal anymore.
I ended up blaming everyone (the market, the broker, ...), then decided to crawl my way back up trading demo and with small position sizes again.... same as a beginner should do.

If you lost money due to that FTX scam, I can relate to how you must be feeling.....
Assessing counter-party risk is complicated, especially when we see institutions, senators investing into our broker....

The only hedge for that is paying ourselves often... I do it every week... my gains (if any ^^) are safer on my bank account rather than on any broker.

Pain of being "inexperienced"

Being inexperienced is the psychological state of not thinking in a rational way anymore and letting our emotions leading our actions.

Typical scenario: we receive "easy" signals and we didn't take them because we were fatigued or furious because we lost taking previous signals with the same system.

Assuming an overall profitable strategy, not respecting the signals from your trading system leads to missing out on gainers and losing money (ending the day/week with a net negative P&L)

Respecting your signals WILL NEVER be easy.... but.... it's the less painful choice as the alternative is wasting your money, your time and your energy.

Conclusion

The pain of losing money is greater than the pain of missing out.... by far....

That's why, most profitable traders burnt 1 or more trading accounts, of course involuntary, and learned that essential lesson the hard way.

Once we feel that pain, we don't want to feel it anymore ever..... and we take a lot of actions such as journaling, meditating, sleeping/eating well, working out to shut down our "monkey brain" acting based on emotions