TRADING PSYCHOLOGY
Revenge And Loss
by Adrienne Laris Toghraie
Don't try to get even with the market. Here are some tactics for eliminating vengeful trading impulses from your trading repertoire.
The temptation to get even when we feel that we have been wronged brings out the worst in all of us. Certainly, when a trader feels the pang of loss, a part of him wants to get even with the markets. However, when a person acts out of revenge, the retaliation often results in greater loss. Typically, a trader will take greater risks to overcome those losses, creating a vicious cycle of greater losses and more psychological pain.
FATHER KNOWS BEST
Charlie grew up in a home where his father made all of the final decisions. Even when choices were made that should not have involved his input, such as deciding what food to order at a restaurant, Dad always introduced his unwavering opinion. If Charlie made a choice that his father agreed with, the decision was never acknowledged. If, however, Charlie's choice did not please his father, he was chastised and punished.
As a result of these poor parenting tactics, Charlie built up a great deal of frustration and anger. Charlie dreamed of getting even with his father one day for creating such angry feelings.
As a teenager, Charlie defiantly made choices that were harmful to himself and others. When he was caught, his father punished him by taking away something meaningful to him. Charlie wanted to attract the approval of his father, but his father did not have the ability to give positive feedback. Instead, Charlie's actions continued to attract derisive comments from his father, further diminishing his sense of self-value. Despite or because of his father's severe treatment, Charlie graduated from college in the top 10% of his class.
After college, Charlie built a family of his own and became a businessman and an equities trader. However, the pain from his past took its toll on Charlie's relationships. While he did not want to be like his father, Charlie resented the members of his family for making their own decisions. He responded by rendering harsh and illogical punishments.
Charlie did not confine his accumulated wrath to his family members. He extended it to his professional colleagues and anyone else who stepped into his path. Eventually, his wife and children withdrew from him. Charlie had succeeded in creating a lonely life for himself.
As a trader, Charlie created rigid rules to follow. When inevitable losses occurred, he wanted to get back at the markets, essentially for not obeying his rules. When he contained his rage, it led to depression, with Charlie unconsciously sabotaging his trading rules. If he vented his rage, he created more losses by taking more risk.
Adrienne Laris Toghraie is founder and head of both Trading on Target and Enriching Life Seminars. She may be reached at Trading on Target, 100 Lavewood Lane, Cary, NC 27511, 919 851-8288, fax 919 851-9979.
Excerpted from an article originally published in the December 1999 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 1999, Technical Analysis, Inc.
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