The Rules of Trading Part 2: There Are No Bad Days
Part 1 of this series on the rules of trading described why there are no rules except the ones you make for yourself.
Now that we've established that there are no rules but our own, allow me to elaborate further in Rule #2: There are no bad days in the markets. I can hear the jeers coming up at me as I write this. "How can you say that, Doctor Janice? Every day seems to be a bad day for me because each time I enter a trade it goes against me. My winning trades are not making enough because I get out too soon. I am getting killed with commissions. What is good about losing?"
When you put on a trade, there are three things that can happen:
1. You win
2. You lose
3. You scratch (or break even)
When faced with any of these three situations, people will generally find a reason to complain. The winner will be upset that he didn't win more, the loser will be angry that he lost, and the person that breaks even will be irritated because he's out the commission costs.
In other words, the states of happiness and satisfaction are not common among traders. Traders are human beings that always want a different outcome in order to feel that they have been successful. If we were to really scratch the surface of a serious trader, we would find very few that are ever satisfied or happy with the way things are going for them in the markets.
When we are stuck in this condition of insatiability, we lose sight of the primary reason for trading. Most would say that we trade to make money, and that cannot be denied. However, the really great traders will tell you that making money is a byproduct of executing their plan consistently and with discipline. Built into their plan is winning, losing and breaking even. These three outcomes are part of the process of trading and must be factored in on any given day in the markets. Every day in the markets is a fabulous day for traders that have learned how to win, lose and break even in a seamless manner.
Since it's almost always those who lose that feel the worst, it is good to focus on the process of losing to understand why there are no bad days in the markets. As with every profession, it is important to understand that learning is a process and think more deeply about what we consider failure or error. We must make mistakes in order to learn from them. If we don't, we'll continue making the same mistakes day after day.
There are many benefits to losing if the trader is able to detach emotionally and take a rational approach to the process. This means that the outcome is losing, but the process is learning.
Great advances in science always come through repeated trial and error. There are no great breakthroughs in any profession, despite what you hear about so-called "overnight success." Outstanding performance and great scientific discoveries come through trial and error until the desired result is obtained. Each error brings with it the possibility to learn, strengthen and improve. Learning from mistakes and then correcting them as we try and try again is the way that we advance, both as traders and as human beings.
Great traders use the process of losing to inspire them. They are not restrained by failure; rather they are motivated to push forward, to learn more, to study harder and to be more disciplined. Literature and pop culture are replete with stories of great artists, athletes and performers who overcame intense setbacks, sometimes to the point of becoming suicidal, who then rise up and reclaim their strength.
Robert Downey Jr., who struggled with drug addiction for years and was finally sent to prison for repeated offenses, made a heroic comeback this weekend. His movie, Iron Man, grossed over 100.75 million dollars in three days-topping the estimates of 70-80 million dollars-and setting a record for being the second-highest weekend gross for any domestic non-sequel movie. Robert Downey Jr., left for dead and a "has been" by his colleagues and the world, made a heroic comeback!
This example speaks to the role of inspiration through failure. He could have just as easily slithered away into a corner and lay there as everyone beat up on him and called him a sick, hopeless addict. He turned losing into winning, and winning into winning big. Just as with Downey, Jr., the trading literature is filled with stories of traders who lost millions and came back to win millions more. They used loss to inspire success.
Many great traders have used their failures and losses to motivate and teach themselves and others, often in a most poignant manner. When traders ask me what books to read, I always tell them to read biographies of and interviews with other traders. These stories can be powerful in terms of inspiration and courage to persevere when all seems lost. It is the stories of losing and recovering that motivate us to become better traders. It is our own losing and the drive to recover that pushes us through every day.
There are no bad days in the markets because we use every day to learn, challenge ourselves, grow, and make us stronger and more courageous and set examples for others. If we look at each day as an opportunity to make our light shine brighter and our trades better, we know that there are no bad days. There is only the opportunity to improve and learn so that tomorrow will be better.
Embrace your losses; don't run from them. Use your losses as learning experiences to inspire and motivate you to find a way to better opportunities and trading successes. I encourage you to look at losses as part of the true recipe for your trading success. There are no bad days in the markets if you are on a steady learning curve, so stay with it. The best is yet to come!
Light tomorrow with today...Elizabeth Barrett Browning
Until Next Time,
Good Trading and Brain On!
Janice Dorn, M.D., Ph.D.
