Hi guys, hi from Andrea Unger.
Rocky Balboa, no pain, no pain…
What does Rocky matter with trading? You probably remember, I hope, because I love Rocky Balboa… You remember the scene with Duke repeating: “no pain no pain” and Rocky himself “no pain no pain” and with this new strength he was facing his opponent withstanding any punch with no pain apparently and that was the start of his path to victory.
So why I’m mentioning this?
Because this happens in trading too, in a different way.
It happens to traders that after they faced a sequence of losses or a bad period, a bad drawdown, they arrive to a point where they feel no pain after a certain threshold, a point where they start trading eliminating all the barriers they put in place before, like Rocky standing in front of the opponent and not defending himself anymore.
The point is that taking those barriers away exposes the trader to a real risk of ruin and the biggest problem is that not only the barriers where withdrawn but it looks like the trader does not even realize anymore the situation he is in.
So he is throwing himself into the markets, into trading into what he is doing with no real awareness of the situation and of the situation of losses occurring, so when the losses accumulated exceed a certain level the trader exposes himself to more losses with no longer the necessary awareness to do something to avoid that situation.
It’s sort of an own sabotage something like that. This happens, believe me, it happens, and we have to avoid this because obviously, this is not the right way to trade.
To avoid that you should keep a diary and keep note of all your activity so that you can review it whenever you stop in the evening or in the morning, whenever you have your trading pauses.
Reviewing it, you can be aware of what is going on and when you recognize that you are exceeding a certain point you can really decide to stop for a while or forever.
I mean obviously, for a while can be one day, one week, one month, one year or forever and then when you start again (if it’s forever you won’t but in other cases you start again) you start with a new consciousness, awareness and obviously you can plan much better what you are going to do in the markets which it’s the basis of a successful trading activity.
So, a discretionary trader will stop, reviewing his activity because he sees from a diary that things are going wrong, he reads that things are not fine and the systemic trader will review his systems because he saw that the results the systems brought are not in line with any of the expectation that could have been put in place when the portfolio system was built.
Rocky with his no pain had a double advantage. First advantage was to strengthen himself because he was convincing himself he could withstand any kind of trouble and he was also getting an advantage on weakening psychologically the opponent because the opponent was saying this guy standing tall in front of him with no problem at all in spite of all the efforts he was doing to put him down.
So obviously Rocky was strong of these two advantages, in trading our opponent, my first opponent is always ourselves, but in this case, we can say that our opponent is the market and the market doesn’t care at all if we stand there and say no pain, no pain!
So believe me guys, there is no Rocky in trading.
Rocky is a beautiful movie, but it’s a movie and we cannot be Rocky Balboa when we face the markets, unfortunately, we can’t.
It can be really painful, it is painful, pain, pain, a lot of pain. Be careful keep track and stay always aware of what you are doing. That’s it for this time. Ciao from Andrea Unger see you next time!