The most difficult thing for traders to do is to sit there and wait. Why? Because, we live in a world that is on a total dopamine, hypomanic binge. This is never more clearly manifest than by those who absolutely have to be in the markets at all times, desperately need to be trading and simply cannot wait.
At one level, this is a type of addiction to excitement, mediated in part by the neurochemical called dopamine. It is the thrill of the game, and the rush that comes from the anticipation of reward. "I have to get in NOW because the price is running away from me. If I just chase it this once, it should be OK because it makes me feel so good when I see the price going up, and I am convinced that I can make a killing on this one. Why should I wait for the price to come to me? Maybe it won't, and then I will have missed it all. There's no fun in that. "This sounds all well and good, and the dopamine brain pathways, which are activated by potential for reward, kick into high gear. The dopamine neurons are firing on all cylinders, and the feeling is one of pure exhilaration. It's all good and wonderful---until it isn't.
Suddenly, the position starts to turn against you. You chased, it came back in and now you are looking at a drawdown. How do you feel, and what do you do?
Well, there's no fun in losing, either. The dopamine reward pathways of the brain shut down, and the brain connections that mediate fear start begin to activate. The end result is confusion, frustration, blaming, self-sabotage, addiction and systemic toxicity. All of these drain the trader and leave him feeling empty, confused, disillusioned and just plain worn out.
Patience frees you from active involvement in the chaotic, and often reckless, behavior of others in the markets.
When you first started trading, what did you hear constantly? Preserve your capital. You heard it, but maybe you did not listen, or did not understand. If you are chasing or getting in just to get in and are getting whipsawed daily; and you are losing, drip by drip, or in larger chunks, you are out of the game. If you are cutting your winners too quickly and letting your losers ride, you are out of the game.
If you wait, take time, assess the situation and then pounce like a jaguar at the right opportunity, your chances for trader longevity increase significantly. You have preserved your financial capital, and deployed it appropriately with a good risk/reward ratio.
However, there is something much more important about capital. It is both financial and psychological. Money is a by-product of the great game of trading.
Your psychological capital is the essence of the person you are...as a trader, an investor or a human being. The first rule trading is: preserve your psychological and financial capital. This means making yourself emotionally, mentally, physically and spiritually strong and healthy. Stand apart from yourself, and look with a critical eye, almost as if you were advising someone else how to trade. When you are able to remove yourself from yourself, you minimize emotional charge. you can put yourself in a neutral position. You allow the newer, thinking portions of your brain to put the older primitive, dopamine-driven brain into perspective.
This is the most difficult journey you have as a trader. You can go out and earn more money, you can turn your money over to someone else to manage, or you can stop trading and invest your energies in some new activity. You have infinite choices about what to do with your money. But, you have only one body, one mind and one spirit.
Save yourself. Preserve yourself. You are all you have!
When you are stressed, sleep-deprived, contaminated with continual worrisome thoughts or in a toxic state because of bad trades, junk food, disorganized and negative-karmic environment or dysfunctional relationships, you have nothing but despair, self-loathing, anger or depression. You are in a state of mental and physical dis-ease and whipsaw, and should absolutely not be trading.
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