Loss and Hope
Janice Dorn (site) submitted this article:
Pain is what you walk through. Misery is what you sit in. Take an old pair of jeans and cut a hole in one of the front pockets. Now, start pouring sand into that pocket. What happens? Sand runs down your leg and to the ground. What do you do? Keep pouring until the sand is up to your ankles? Your knees? Your waist?
At what point do you realize and act on the fact that no matter how much or how fast you pour sand into the empty pocket, you have a hole in your pocket? At what point do you come to the conclusion that you either have to stop pouring sand or just take off the pants and run away as fast as you can?
There are many who will keep pouring until, eventually, they are up to their neck in sand. Suddenly, it begins to feel like quicksand and they are trapped. Can’t get out now matter what they do. It is now too late since there is just too much sand all over them and they are trapped. Then the feeling changes to one of being drawn downward into the quicksand, unable to breathe, choking and suffocating into the murky slime all around.
This is how it feels to lose. The hole in your pocket is the losing position. The sand is your mental, emotional, physical and spiritual energy just pouring out until you are drained, have nothing left to give and are literally sinking in the sand of your own creation.
I spoke with a trader yesterday who told me that the instant a position went against him, he cut it and moved on. I spoke with another trader yesterday who told me he was down nearly 50 of his entire portfolio on two positions which he had been holding for nearly five months and that he could not cut it because it was too late, too much money lost and he was trapped. Perhaps you can identify with one of these traders, and perhaps not. Most certainly, if you have been trading for any period of time and you have not employed a rigorous stop loss discipline, you have felt your physical and psychic energy going into a losing position.
The trader who cuts his position immediately is out the commission and the (usually very small) drawdown. The trader who is holding a 50% portfolio loss does something that is quite common and damaging. The trades almost immediately went against him, but he did not get out. He stayed with them, holding and hoping and turned two losing trades into investments! The mind has a unique way of playing such tricks on us. Since he could not take the losses or honor stops, he played every manner of brain game with himself and decided that the positions would “come back one day” and entered onto the slippery slope of hope. If a portfolio is down 50% what percent does one need to make in order to recover back to break even?
How does loss of psychological and physical capital with focus on a losing position manifest itself? Irritability, sleeplessness, continual searching for something or someone to affirm the losing position, anxiety and dysphoria, tick-itis (the toxic habit of watching every tick of the position day after day), rumination, self-deception, impairment of social and family activities and a litany of other unpleasant emotional and physical states. Perhaps the worst aspect of this is the spiritual deterioration which is manifest by self deception and, often, deception of family and friends. One is rarely capable of owning true feelings of guilt, shame and inadequacy and shifts into a mind morph where a trade becomes an investment. Holding and hoping then set in.
Of the panoplies of emotions that flood traders and investors on a daily basis, the most risky is hope. It becomes a passionate hope that, once the Market Mistress has seduced us, she will, one day, become kind to us and love us.
The most rigorously honest thing that I can say in response to this type of thinking is: Abandon hope. As extreme as this may sound, it is the only way to be consistently successful. Attachment to a losing position is a recipe for more unhappiness and illness than any one of you deserves. Eschew complacency and mediocrity in trading and life. Cut losers quickly and do not sit around waiting for The Mistress to rescue you.
Who can say what is waiting for you at the bottom of the slippery slope of hope? Get your head out of the sand and get out before it is too late. Suffering is optional and you are in control. Take the power and use it to make yourself strong and to live and breathe with freedom to play another day.
