Page 473 - THE MARKET WHISPERER

THE MARKET WHISPERER 46 9

and red lights will go off in their minds and they will take steps to halt the
downward spiral immediately. Do you know what happens on the trading
floor on “black” days when stock exchange prices are falling too fast? The
main computer is programmed to stop trading, and an announcer sends
the traders home. Not a bad idea! You should adopt it, too.

Here is a possible scenario. You open the day with a loss. It can happen
and it’s not a big deal. Another loss makes your head spin uncontrollably.
You quickly discover you’ve executed an extraordinary number of trades.
Then you go ashen when you see you have doubled or tripled your loss.
By the end of the day, you realize only too well what happened, and you
promise yourself not to repeat this set of behaviors. Surprisingly, the
next time it happens, you discover you’ve learned nothing at all! (Hey,
are you keeping that trading diary?) This is usually the stage where you
acknowledge and begin to understand the process, realize that the urge is
stronger than you are, and that you need to build a prevention plan.

The day after the loss you wake to a new day of trading and discover
new problems. Now you have become hesitant about clicking the buy
button. You avoid trading, miss out on good trades, and quickly discover
that yet another day has passed and you’ve earned nothing. You remember
the pain of yesterday’s loss and naturally try to protect yourself from
re-experiencing it. The psychological effect is petrifying you. What is
the solution? Avoid empowering the loss on the first day by identifying
the problem early and taking preventative steps, understand that losses
happen even to the best of traders, and learn to put yesterday’s troubles
behind you.

Using your hatred of losing productively can turn into significant profit,
which is why I think we need to love our hatred. We need to leverage it,
take advantage of it to learn how to cut losses before they balloon, and
distance ourselves from a psychological state that leads us into further
losses which, like a magic wand, will quickly make our trading account
disappear!

Know Thy External Foe

Who is your enemy? Remember that it takes two to tango in every trade.

Naturally, both buyers and sellers think they are making good trades, but

only one side is right in the end. If sellers profit (i.e.buying at a low and

selling at a high), then in their minds the stock “has done what it needs to
do.” On the other hand, even if sellers lose on the trade (buying at a high