“To Err is Human”, but in trading it is a common occurrance that traders will intentionally do things that result in losses. The situation we’re looking at is not losses that are the result of testing out a trading plan or a particular combination of indicators. Nor are we talking about simple errors made purely by accident. If profit is our goal, then why would we do these things that are clearly against our better judgment? This phenomenon has many very undesirable consequences that are experienced quite regularly in the trading world.
The Trader’s confidence can take a severe blow When these intentional mistakes occur on top of the loss of money. Additionally, the trader will then engage in quite a bit of traders putting themselves down for having made the mistakes. Depending on the magnitude of the error, this can be the start of a rather vicious cycle that compounds the problem and sets the stage for recurrence. Until the root cause of the issue is discovered and the person takes action to address it, the self-sabotaging behavior is likely to happen again and again. Experienced traders can encounter this as well.
To give you an example, one such trader (a real person that we’ll call Mark) of over 50 years had been going through this month-after-month for over a decade since becoming an individual trader trading from home. Mark has done just about everything there is to do in the futures industry. He worked on soybean farms and at the shipping docks loading ships and coordinating shipments and orders. For about another decade, Mark ran orders on the exchange floor. After that, he worked both for and as an introducing broker in the commodities industry until he decided to retire at the age of 59. Needless to say, Mark had plenty of experience in trading, but for nearly 15 years, Mark has been losing money. But why, and why does he continue?
Trading is definitely nothing new to Mark. As a broker, he was very successful. He understands just about every strategy and system there is. He’s pretty sharp and knows his way around the computer and what he’s looking at on the charts. Mark loves trading and is excited about getting out of bed every day to get busy with his trading. On a typical day, he might make $600 or lose $800. More often than not he loses. When his wife gets home from work (yes, she still works at the age of 70), he’s usually brooding in his recliner after kicking himself and calling himself “stupid” or “idiot”. In all these years, he still has yet to end a year in the black. He’s also not sure how much longer his money is going to last.
In response to the question why he sticks with his current method, and why he doesn’t make use of a system that he knows can make him money, he simply says that he doesn’t want to because they lack excitement. This is very true: a well-planned trade, where you know what you’ll do before you get in regardless of which way the market moves can be very boring. But… when you enter trades without a plan, or if you’ve done something outside your rules, the suspense can be very powerful.
Why do people take the time to sit through movies instead of just skipping to the end to see if the hero triumphs or fails? Why do millions of people watch baseball games, rather than simply check the scores in the morning? It is the suspense, the excitement of not-knowing the outcome, that brings the thrill. The moments that are most enjoyed and fully captivate us are when the ball is in the air and we don’t know if it will be caught or dropped, when the hero’s fate hangs in the balance. In being human, there is a part in all of us that craves that tension.
At the conscious level, profits are what everyone desires (who doesn’t?). Many people choose trading because trading offers the opportunity to realize very substantial monetary gain. The danger is that it also offers the thrill that a certain part of us craves at the subconscious level. If that part of you isn’t being satisfied in other areas of your life, it is highly probable to seek fulfillment in your trading. Excitement from not-knowing the outcome in your trading is where the results can be disastrous. What you need to do is to include activities in your life that tend to this very human desire, and let your trading be a little boring – but profitable.
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