Trading in the equity markets can be exhausting – emotionally, physically, and mentally – and may leave you with an overwhelming sense of negativity, accompanied by an air of pessimism. These can wear you down rather quickly, since trading is often a one-man show: family and friends are often critical of such a career, not giving the emotional support that you will need.
If you find yourself stuck in a rut, and feel as though you cannot break out of it, do not despair – hang in there!
Remember, sometimes getting less-than desirable trading results is all a part of the learning process – accept this as gospel.
Below are a few examples of the problems that negativity can cause in your day-to-day life.
The Vicious Spiral
What is this vicious cycle, you ask? If you are feeling negative and pessimistic, it will kick you onto the path of making poor decisions, thus getting you poor trading results. This, in turn, causes a lack of drive and enthusiasm, which also hinders your mental healing and confidence building. This makes you feel even more negative and pessimistic…
Do you see the pattern?
If your feelings of pessimism and negativity persist, they might even cause you to prematurely end your trading career.
Sounds nasty, does it not? Below are some hints, tips, and home truths that I have learnt to overcome such spirals.
Understanding and Working Through Your Feelings
The best way to avoid sinking into a negativity spiral is to avoid ending up in one altogether.
As Benjamin Franklin once said, ‘”An ounce of prevention is worth more than a pound of cure.”‘
When you are feeling down or pessimistic, try to not let such negativity fester – these types of emotions begin the dreaded spiral. Instead, simply accept them –this includes both the good and the bad– and fully understand/recognise what is happening, and why it is happening.
If you can recall, traders are supposed to be emotionless. Unless you are some type of secret artificial intelligence, that is a near-impossible task to achieve – the next best thing is to fully understand and catalogue what actions are resulted from these pessimistic feelings. For complete coverage, you may also wish to do the same with your positive feelings and emotions, too.
Once you understand both their natures and their consequences in your life, you will be able to understand and sidestep such troubles.
Personally, the article ‘5 Fundamental Truths about Trading’ (by Mark Douglas) is a fantastic reminder for me. Other trader-friends frequently flick their desktop computers off and then hit the gym – others like to write, read, go watch a film, and etcetera.
Everyone has their own unique, stress-busting activity.
Just remember that being over-confident can be just as damaging as being negative and pessimistic – and even worse, in some cases. They as well can trick you into making bad decisions and choices.
Ari Kiev wrote an interesting little book called ‘Hedge Fund Masters’. In its pages, he personally interviewed many of the world’s top equity market traders, and analysed their trading methods as a whole… and one of the conclusions he came to was that “[sic] your own thinking is the source of your anxiety.”
Essentially, “[the] paralysis of analysis”.
To break through this problem, simply follow the KISS (affectionately called ‘Keep It Simple, Stupid!’) rule, and take action! Just remember that you also should not rush things – if a trade setup is in line with the rules, go for it, but do not confuse the two.
Here is an example of what not to do:
You find a trade, and within a short time-frame discover that it matches up to your rules. However, you then begin to look over the same trade over and over again, and with each re-check, doubts and worries begin to appear. Ultimately, these emotions cloud your judgement and interfere with your decision-making.
Self-confidence is essential in the battle against pessimism and negativity. When you are confident about the task at hand, hesitation and needless worrying are things of the past.
In order to build your self-confidence, you will have to keep practicing, which builds up positive thinking and beliefs – the more you believe, the more effort and dedication you will put into practicing, which leads to bigger actions and results, and which finally reinforces your positive thinking.
Negativity and pessimism will soon be replaced by positive feelings and beliefs.
I was once told by a fellow trader that making money from equity trading is not so much a question of “if I can”, but more along the lines of, “how much more can I earn, if I become more skilled?”
This type of positive thinking is what both aspiring and experienced traders should always have. Terminating all negativity is essential for achieving this type of mindset.