V.11:10 (437-439): Overcoming Trading Trauma by Ruth Roosevelt

Overcoming Trading Trauma by Ruth Roosevelt

Bad experiences can easily become imprinted in our memories. Because we act according to past experience, we tend to repeat our reactions to situations unless we alter our memory of that experience, thus creating a new map for our future actions. Ruth Roosevelt, director of the Wall Street Hypnosis Center, explains how to overcome a difficult trading experience and ensure that the same mistakes will not be inadvertently repeated.

Traders often ask me to help them get over an overwhelmingly difficult trading experience. The impression of their experience lingers in their minds, causing a variety of trading difficulties and an inability to proceed optimally. Losing money in a bad trade is difficult enough to recover from, but the loss of confidence and the underlying fear that result can become major hurdles to future trading endeavors. The experience is often repeated, not only in the form of nightmares but also in actual trading.

FOR EXAMPLE

One trader I encountered was superb at what she did, building up her equity month after month and year after year. Her sense of invincibility increased and her confidence in the possibilities of a particular situation was so high that she risked everything in one trade. The trade blew up and she lost 90% of her equity in a two-week period. Because she was a skilled trader she was able to rebuild her equity, but the fear lingered and haunted her trading.

Another trader I met was a professional trader working for an institution where almost every trade was hedged. He began to speculate in his own account. His original idea was to put on a currency spread position; unfortunately, a friend talked him into putting on an outright short dollar position. He put on a five-contract position, and almost immediately it began to go against him. He left the trade on for a full year and lost $100,000. The psychological damage suffered during that long year far exceeded the monetary loss, which alone was great enough. Even though he tried new methodologies, he found himself unable to place a trade after that loss, and if he did, he could not stay with it. His dream was to trade full time for himself, but he was falling further and further from accomplishing that goal.