The Fallacy of Psychological Advice for Traders
As a trader, I've consumed countless psychology articles and books, hoping to find methods to curb my internal drive and cope with the agony of financial loss. After extensive reading and watching webinars by renowned psychologists, I can confidently say it was a waste of time. The typical advice often feels as useful as putting a band-aid on a severed limb.
I ended up creating my own psychological toolkit because standard methods proved ineffective. Here's a critique of conventional advice, along with some personal insights that might help others.
Flawed Psychological Methods
Example: "Six Mindful Strategies to Recover from Loss"
1. Find Support
- The reality: Friends and family may not understand or offer genuine help. Often, they are unsympathetic or even scornful.
2. Sit in Silence and Reflect
- The reality: When in deep pain, reflective silence offers little relief. Immediate emotional turmoil is too intense for calm introspection.
3. Trust Your Inner Strength
- The reality: Vague advice. How does one practically develop this trust, especially after a major setback?
4. Focus Amidst Grief
- The reality: Deep breathing and focusing exercises are often insufficient in the face of overwhelming emotional pain.
5. Envision a New Life
- The reality: Visualizing a bright future while in distress is impractical and can feel delusional.
6. Practice Mindfulness
- The reality: Meditation and yoga might help eventually, but are hardly a solution during the peak of crisis.
My Approach: A Realistic Framework
Stage 1: Acute Phase
- Accept that the acute phase of loss is unavoidable and excruciating. Allow yourself to grieve fully. Denying emotions only intensifies future pain.
Stage 2: Reevaluation
- After the initial emotional storm, small joys and personal indulgences can help begin healing the emotional void. Gradually, construct a new perspective on trading.
Two Key Insights:
1. Infinite Potential
- Unlike traditional careers with clear ceilings, trading offers limitless growth. Realizing there’s no cap on potential earnings fosters hope and resilience.
2. Losses Aren’t Final
- In trading, lost money can always be regained in future trades. This perspective reduces the sting of losses, viewing them as temporary setbacks rather than permanent failures.
Conclusion
Conventional psychological advice often fails to address the raw emotional reality of traders. By embracing the boundless opportunities in trading and understanding that losses are not the end, one can develop a more resilient mindset.
