Revenge Trading, FOMO, and Freezing

Freezing

The failure: “Freezing: that’s one of the worst things you can do. And when people lose they start freezing. ‘Maybe they’ll come back, I don’t know what to do, I’m not going to look’… There’s no reason to sit in a losing trade and freeze. We’ll find you something good. It’s feeding time at the zoo all day long… Nobody ever made money off a loser. Because you’re wrong, and when you’re wrong things tend to go real wrong.”

Rule: exit the loser. Opportunity is never scarce. If freezing has become a pattern, stop trading first.

Revenge trading

The failure: “The thing that you just got murdered in is the least likely vehicle for you to get your money back. You just get destroyed, and then it will do nothing: ‘I’ll just trade my way out of it,’ and it does absolutely nothing, and you just get chopped up after getting fully destroyed…”

Rule: “That’s why we always go where the action is. We don’t trade stocks, we don’t trade futures, we don’t trade forex; we trade setups, when the setup is there.” Take the next actionable signal that is there. After a blow-out, do not go back to the ticker that beat you: it is the least likely vehicle to make the money back. A small loss on a tight stop (about 0.1% of the account) is not a blow-out, so you can re-enter that name many times.

FOMO and the hurry

The failure: “Most people are just way too impatient, especially on Mondays. When I started out I’d be on the computer all weekend rifling through charts, coming in with my million best ideas Monday morning, just get stopped out, chopped up, and by the time it does what I thought it would do I’m too beat up to do anything.”

Rule: “Like, what’s the damn hurry? You can have two trades that make your whole week if not month, if you just wait.”

On the trade you “missed”: “‘I missed it.’ You didn’t miss it, you got out of the way.” And: “If it’s really going to take off, you got a million entries.”

Say it out loud

Rule: “Say exactly out loud what you’re seeing and what you’re doing. ‘What do I see here? I don’t know.’ Then don’t do it.” Rob’s shorter version: “If it sounds dumb out loud, it’s dumb.” Keep the trade checklist on your desk and speak each item before you click.

Fear inside the trade

The failure: “Inside the trade, the fear is stronger than logic.” Rob’s red-light analogy: “Normally you see a red light, you stop; otherwise you’re going to get killed. In trading they’re like, ‘hey, there might be a million bucks on the other side, let’s just go through the red light.'”

Rule: “You’re rational human beings. Forget all the other garbage and just see it how it is.” Repetition is the cure: “keep seeing it and seeing it. It’ll become second nature.”

Related: Fix Your Trading · If You’re Losing, Stop Trading · Trade Checklist · Be a One-Trick Pony
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