The Most Emotional Trade Since The GFC?

February 18, 2020 / By Nick Radge / Trading Psychology

I don’t think I’ve received so many emails about a trade since the GFC. Let’s take a look at Tesla (TSLA).

You either love it, hate it or, after this week, loathe it.

It’s been a roller-coaster for those on the trade or fierce FOMO for those that haven’t.

Today I’d like to discuss emotions and trading. And I’ll be controversial.

With permission from this client, I want to revisit one of the many conversations I had this week on the back of the TSLA trade. It’s a little long so grab a coffee (or a beer) and take a read…

Paul B: I have got to the stage where I don’t check my account daily, but rather simply update my spreadsheets on a Saturday morning letting the systems do their thing.

This morning, however was a different story.

I woke to see my order for TSLA didn’t trigger and instead of sucking it up and simply buy, the mind games began. Have I missed the boat? Will it go down once I purchase? Knowing my luck it will probably will etc….

It really was playing on my mind. I did however still click the buy button.

After the purchase I saw myself falling back into my old self. Checking the latest purchase every 5 minutes. It really was a conflict of emotions I hadn’t felt for quite some time. Why did the games happen? Because I was pissed I missed on the day’s gain using a limit order instead of opening order – something that could’ve been avoided. I was getting caught up in the situation instead of letting the strategy play out.

My question for you is, even though I still pushed the buy button, do you, with all your experience, have periods of the mind demons playing with you?

If so, how do you deal with it?

Nick: I truly believe the difference between success and failure, at least over the longer term, is the ability to forget about the money. Once you forget about the money, then all that is left is process.

Do I have doubts sometimes? Sure.

But what’s my downside? What’s the worst case scenario?

If TSLA drops to $300, what impact will that have on my life?

Nothing.

If TSLA goes to $1500, what impact will that have on my life?

Nothing.

What impact of NOT following my strategies over the longer term?

Massive.

Paul B: But with a market order at open, does that not leave you open to paying an unreasonable price?

[Let’s stop for a moment and think about that last response. Read it again. Do you see it?]

Nick: Was the open unreasonable? It rallied another 41%.

…and that line of thinking is exactly what I’m talking about…you’re thinking money, not process!

Paul B: That made my head explode. In an instant I look at it from a completely different angle. I literally leaned against my desk, hands in head, an epiphany of sorts.
You have to experience this stuff to grow.

So in summary, the more weight you place on the monetary side of trading, the more emotional you will become.

Losing. Winning, Missing out. All money driven and all weigh psychologically in different ways.

We trade and invest to increase our wealth.

And therein lies the irony.

Do I have an exercise to help? Sure.

Trade with a small enough sum that, whatever happens, it just doesn’t matter.

If you lose it all it won’t change your life. You won’t need to explain it to your spouse. It won’t keep you sleepless. You won’t question placing an order, taking a profit or even taking a loss.

Each day when you look at the market, it becomes, “meh…whatever…” and go about implementing your process.