Market Psychology – Regret
By: Gaurav Taneja, Financial Trainer, Venteskraft May 19, 2020
One often faces actual harm, when trading in the stock market. If you bet a lot of money on a single trade, and it goes against you, you lose it. The actual loss of money is painful to loot at. It keeps hurting and you start regretting, why you made that trade. This is a human instinct to avoid paint at any cost. Not only is the loss of money painful but even the feeling of regret of taking the wrong trade. And this feeling of regret is so powerful that most of the times traders avoid putting a trade, for fear of having to face a loss or regret. It feels like the feeling of regret is more painful than the actual loss of money.
But is this regret good or bad? The fact is that neither it is good nor bad. It depends on how you take it. For example, if you take a trade solely with your intelligence, and if it goes wrong it will not be that painful because you know you might have made a mistake. But as soon as you combine your ego with the trade, you just can’t accept to lose. Feelings of regret are painful. If you keep earning the money consistently from stock market, it will grow exponentially. Same is with the regret, if you start taking it to your heart every time it comes, it will start increasing exponentially and there are chances you might even leave trading.
Usually the only straightforward solution to cope with regret is to avoid placing the trade. Until you place the trade, there are zero chances of being wrong, and if you are not wrong then none of it will be born. But neither will you learn to trade nor will you earn the profits, the main reason you started trading. So the most important way of coping with regret is to accept it as an emotion and accept that it will come to you as a trader. It is completely delusional to think that you can avoid the regret. You can remind yourself that regret is not that bad as you are overthinking and making it.
We as humans have a habit of overthinking and overstating the bad effects of the outcome. We tend to think that losing a trade would be awful, terrible and catastrophic. The truth is, if we control our risk on the trade, and plan it out carefully, the risk will be minimized and not catastrophic at all. Think in terms of probabilities, “This is just one of my many trades. The outcome of this single trade means nothing. The big picture is all that counts.” Do not let the tendency to avoid trade become a habit. Regret is a powerful emotion, it can be painful also. But it is not necessary to let the fear of regret influence you.
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