The Trader: Why trading can make you angry

I got lucky when I started trading.

Well, my first trade was a 100% loss with a company called PeerTV.

So whilst that wasn’t exactly lucky, it was lucky that I kept going.

And also lucky that back in 2016, the market was in a huge bubble for small-cap stocks.

You didn’t even have to be good. Which was lucky, because I wasn’t.

And so I turned my small savings into a not so small sum, and then made the jump to full-time the same year before Christmas.

Luckily for me, 2017 was another bull year and so my account kept growing despite not being very skilled. All that learning would come later. Had I started in 2018, the conditions were not the same.

At the time, I knew a guy who turned a few thousand pounds into a quarter of a million in two trades. He went all in on an oil company, which found oil, and then went up 10x.

He then took the money out and put it into a tech co… which then also went up 10x. Now that was lucky!

Trading comes down to lots of things but luck is also a big factor.

And generally, you increase your surface area exposure to luck by working hard.

However, that is not always the case in trading, and why one of the reason trading can feel unfair and even make you angry.

It’s easy to fall into the trap of thinking “If I spend double the amount of time looking at charts then I’m bound to find double the trades”.

And whilst you do need to be looking at enough charts to generate trade ideas over time and keep a feel for the market, trading tends to be asymmetric returns and not directly correlated to the amount of effort you put in.

Spending more time with your journal and spending time coming up with trading ideas is never a bad idea. You’re more likely to improve, for sure. But it doesn’t guarantee results.

This is not like other sports where focused effort typically sees improvements.

For example, if you spend several hours a week practising ball control, over time (and quite quickly) your ball control will typically improve.

Few people practised free kicks more than David Beckham, and David Beckham just so happened to be one of the best dead-ball experts of his time.

But expecting the market to reward effort fairly will only lead to a feeling of betrayal and injustice.

Just like life isn’t often fair, neither is the market.

Here’s a typical spiral of decline as a trader who believes effort should be rewarded.

1. Trader loses on a trade

2. Trader feels like the loss was unfair

3. Trader’s belief that more effort leads to better results kicks in

4. Trader starts putting more hours in and becoming fatigued and unobjective

5. Trader makes suboptimal decisions as a result

6. Trader’s suboptimal decisions lead to more losses

The thing is, point number 3 is not a stupid belief.

But it stems from point 2, which is.

Trading can also make you angry when you’ve put the time in and done the work, and yet the outcome doesn’t go your way.

If you’re right 50-60% of the time, that means almost up to half of your trades are going to be losses.

Even the best only have strike rates of 60%.

Peter Lynch said “If you’re in this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”

What’s the solution?

You have to accept that the market isn’t fair, and that sometimes you can do everything right, and things can still go the wrong way.

Each trade is a variance. You’re not looking to win on every trade but over 100 trades.

Next time you start thinking that you need to revenge trade in order to get back on the stock to make your capital back, accept that trading is about following a solid process over the long-term and not about quick wins.

Trading isn’t a way to get rich quick, but it is a way to get rich slowly.

Ensuring that you’re playing the long game, tempering your emotions, and accepting that the market isn’t fair in the short term is the way to success.

And if you find that one stock is your doom stock and whenever you trade it, you always lose… guess what? Stop trading it as you’re likely emotional towards it and this is affecting you.

It’s the same if your data tells you that 90% of the time you have losing days on Friday. The answer is clear… don’t trade on a Friday.

Michael Taylor

Get Michael’s trade ideas: newsletter.buythebullmarket.com

Twitter: @shiftingshares

This article is for educational purposes only. It is not a recommendation to buy or sell shares or other investments. Do your own research before buying or selling any investment or seek professional financial advice.