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THE MARKET WHISPERER 46 5
the trader’s mind, who then continues trading against the trend. But the
outcome will too quickly “straighten out” and the trader’s account will end
up “crooked,” since trading against the trend does not pay off in the long
term. The trader who has learned to execute bad trades will repeat that
error in the future. Then, believe me, this sure recipe for a gradual wipeout
will become apparent soon enough.
SMART The stock exchange has a shameful habit: it gives loans
MONEY to anyone asking, but wants them back with shameless
interest rates!
Sitting on Your Hands
Sometimes the best thing to do to avoid losses is simply not to trade.
Every employee has days off from work. Stocks traders need them too. Some
may be predetermined, such as when Wall Street closes for the Fourth of
July, but there are also days when the market moves in too narrow a range
to make trading worthwhile. On those days, just don’t trade. The surfer
needs the right waves to surf. The trader needs market volatility. This is
the trader’s daily bread. If, after an hour of trading, you see the market
is flat, take a day off. Who are you working for? Believe me, the only ones
who have earnings on flat days are the brokers.
Handling Loss
Our success depends on our mental conduct. The psychological baggage
we carry with us strongly impacts our decision-making processes, and
therefore our chances of success. Before making important decisions, we
must examine our psychological preparedness. On days when we are too
deep into negative moods that could affect our decisions, it is far better
to keep a distance from the market and find other things to do. These are
days when we may be fatigued, have argued with our spouse or someone
else, when there are problems at work, and so on. A well-known axiom
states that “knowing when not to make decisions is just as important as
knowing when to make them!” Deciding not to do anything is far harder
than deciding to do something.
How often has it happened that after making a bad decision, you berated
yourself with “why did I do that??!” Most frequently, bad decisions derive
from an unconscious negative frame of mind or mood. We need to be far
more wary of the unconscious than the conscious. The problem is that we
