Face Regret Head On
If you are not in the habit of following sound money management principles and risk analysis then you face actual harm. For example, you commit too many dollars into a single trade and it goes awry - you lose much more than you should have, and it’s painful. More than being painful, you come to regret having made the trade in the first place. A very normal human instinct is to not only avoid pain, but to avoid pain at all costs. Regret can be incredibly painful and will make otherwise good traders avoid even putting on a trade for fearing the regret of another loss.
If we put too much ego on the line with any decision, the hurt and the regret intensifies. If we put a lot of work into a trade we have also then put a lot of self-identity on the line along with our money. With all this work into this particular trade we really become convinced we are right. If it turns out that we are wrong it suggests to us that we are just not as good as we thought we were. Nothing could be further from the truth.
The easiest way to avoid feelings of regret is to avoid making decisions. If we do not make a decision then we can’t be wrong and we won’t feel regret. However, if you do not make decisions you also cannot make profits, which is our goal. It is better to learn to face regret head-on.
The best way to cope with regret is to accept the fact that it is an emotion. An emotion that you will be facing as a good trader. If you have a written business plan (trading is a business) you know that losses are part of this business, as they are in every business. If you take the proper precautions however, you will keep those losses small enough that being able to deal with regret should be somewhat easier. As time goes on and you see your plan working; regret will become easier and easier to face. A useful thinking strategy is to remind yourself, “I’m making more out of the potential loss than it deserves; it is not going to be as unpleasant as I’m thinking it will be.”
Another way to minimize regret is to try impersonalizing the trade. Think in terms of probabilities, “This is just one of many trades. The outcome of this single trade means nothing. The big picture is all that counts.” By reminding yourself of this simple fact, you’ll minimize the potential regret, should you lose. Also it’s important to remember that a single losing trade (or even a few losing trades) doesn’t mean that you have poor trading skills; it may just be a run of bad luck. What is the point in making the outcome of a trade symbolic of your skills as a trader? It’s Not! And, most importantly, never put your self-worth on the line with your money. You’re a professional. The outcome of the trade should not influence the positive view you have of yourself as a person. Don’t try to avoid regret. Face it head-on. You’ll feel more free and powerful.
