It’s a hell of a thing to blow up your stock market trading account.
Forget the financial loss, or lets put it aside a moment (though we know that’s impossible). The mind creates a flash image of a billowing mushroom cloud dissipating in slow motion as seen through moist glistening eyes. Red digits seem electrified to life scurrying about carrying their weapon of choice, the negative sign (-), looking for a place to rest.
As reality sinks in, the devastation on the screen, takes away the dreams, hopes, and aspirations that your initial enthusiasm convinced you was just a few exciting buy/sell clicks away. It destroys, not just the dollars, but what money you’ll ever have from this source for now.
Worse yet, beyond the immediate financial loss, is a new experience, a new feeling– self-doubt, a loss of confidence. If the loss was at the hands of a newbie the experience probably ends a career in anger and frustration. However, if the loss came from an experienced or somewhat experienced trader, it can be more devastating, more debilitating.
The money is one thing, but the knowledge that it could have been averted is overpowering. The mind replays the scene in a relentless loop and then goes to bed for sleep, only to replayed, in detail, in dreams. We call those nightmares.
I read somewhere that any successful trader has in the past blown up his or her account at least once, if not two, or more times before becoming successful. There’s a fine line, evidently, between determination and insanity.
Whether most are willing to admit it, learning to trade takes time, and who these days has patience and time?
There is a reason beginners hear, from the plethora of trading resources, the adage: Keep your losses small. You cannot succeed if you run out money to bet with.
Not only that, as you mismanage your money, perhaps taking too big a trade, or doubling down on a loser, or violating any number of trading rules meant to keep you in the game, the disillusionment and breakdown in confidence sets in until that last “lotto” trade is made. A lotto trade is one that is such a long shot that it can’t possibly win without divine intervention.
Hope and prayer is not a trading system nor a strategy.
In the end, that smack-down has cost you more than money. Funds can be re-accumulated and put back to work; the crushed confidence factor can also be rebuilt; and even the black and blue ego left bleeding on the side of the road to riches has a chance for a comeback.
Confidence rebuilding is a process, sometimes a long process. Ultimately, your strong desire, passion, commitment to the game, the process, the reward of trading will see you through.
The ego factor should not have been involved in the first place. Ego has no room in trading. If you’re right and you won, move on. If you were wrong and lost, move on. Your ego had nothing to do with the winning but I can probably guarantee it had something to do with the losing. Did you ever say, “I just KNOW this is going up/down!” and hold that trade while it goes strongly against you?
Ego and confidence are not the same thing. Confidence in your knowledge and knowledge of your limitations should work to keep you out of trouble. Ego, needing to be right, will only lead to the “also ran” club where reruns of mushrooming clouds are shown.
Confidence, I heard, is best described as a bird sitting on a tree branch. It is not afraid of the branch breaking because its trust is not on the branch but on its own wings.