Getting over losses
Let’s talk about losses. Not just market losses (account drawdowns and loss of trading capital) but losses in general. They generally come with early warning signals - there are few losses in life that don’t have warning signals (think loss of loved one in death or perhaps loss of a job due to a company downsizing or the like)
The warning signals are important - you have to be conscious of worst case scenarios when trading and you have to expect and even anticipate that a worst case scenario can happen at any time, in both life and in your trading.
It is certainly possible to time the market (some traders do it all the time) - however, it is impossible to force anything to happen. As traders, and as human beings, we are powerless over what could occur. This morning, if another 9/11 event occurred, it would shake financial markets to their core. The only fail safe that you can have against such an unlikely event is to fall back on your trading rules and your position sizing. Knowing how to use both of those mechanisms to your advantage takes a lot of time and experience.
I’ve long been convinced that the BEST traders in the world (the ones with a stable, consistent equity curve) are the ones that have blown up accounts and have failed miserably in their early years of trading. Experience is the best trading partner you can ever have, but she isn’t cheap and she isn’t easy. Often, the best way to avoid maximum pain and capital losses is to have experienced the emotional toll of them first hand. The resilience and ability to bounce back from such losses - and learning to trade from a position of confidence and a position of power can often only come after experiencing painful losses.
When a large loss occurs, the best thing to do is to really FEEL it. Let it sting, let it burn, let it bring all those pangs of failure, self-doubt, worthlessnesss, embarrassment - whatever it is - and allow those emotions to be fully experienced and then wear them like a scar or a tattoo in your future trading. You’ll learn FAR more about markets, about your inner-self, and about your trading rules from a position of failure than you ever will from success.