Featured Article

Are You Trading to Win or Trading Not to Lose?

woodyjohnson
Dr. Woody Johnson
Instructor

As an answer to the title question, many traders might say that they are trading to win. But, actually you might be surprised to know that most people are trading not to lose when participating in the financial markets. What is the difference? Well, let’s begin with trading not to lose. It is based on the philosophy that as a trader, you must remain in the comfort zone and if you are knocked out of your comfort zone, you must scramble to get back in by grabbing the first thing that affords you temporary emotional relief by giving in to impulsive behavior and hoping to get the results that you want. Trading not to lose is based upon the notion that trading results must come easy and the trader is constantly looking for the quick fix or the magic bullet in the form of an indicator or setup. The perceptions of the trader are driven by negative emotions like fear, greed, doubt, guilt and anger. These emotions stem from deep-seated limiting beliefs about yourself and out of these limiting beliefs come thoughts; for example, “I must move my stop or I’ll get stopped out and that means I’ll lose.” A trading not to lose strategy is closed with limited alternatives; it blames others or outside influences first and seldom looks inside to identify issues that are negatively affecting results; this strategy promotes irrational thinking. Trading not to lose encourages erratic and illogical behaviors, while looking for the easy win often leads to putting large positions at risk and reneging on rules.

The philosophy of trading to win, however, is based upon the notion that trading is a journey in self-discovery and that trading as in life is about growth, courage and meeting challenges. Trading to win is about having a commitment to excellence and a belief that learning is critical to success. It is based on a conviction that losses are lessons and an expense being a trader; that failure is only feedback. Trading to win also embraces the power of patience in waiting for the high probability trade. Trading to win entails the search for objective reality and holding on as though your life depended upon it (and your trading life does). The trading to win strategy owns all results by using techniques like journaling to find out what is and is not working. It is about holding yourself accountable. The trading to win trader is prepared to use protocols and effective routines in order to ensure sustainable success. This strategy is intellectually and emotionally honest. Furthermore, when you are trading to win, you have the enthusiasm and energy necessary to address your trading weaknesses, but you can’t address a weakness that you either don’t know or don’t understand. The trading to win strategy recognizes that trading necessitates losses and that effective long-term winning means managing risk, having an iron clad commitment to rules, goal-setting, planning and methodical, smart trading. The trading to win strategy is winning the psychological war one battle at a time.

Your issues, obstacles, and problems that plague your trading must be treated like an infestation in your home; you want to know that the cockroaches are there so you can weed them out and get rid of them. That’s why the “Thought Journal” is a critically important addition to your tool box. Most of you already know that smart trading means tracking and documenting your trades in order to get data on how well your trade plan is working. Similarly, you must also gain data on what you are thinking and feeling because this is how you uncover the unconscious issues that act as drivers to bad behaviors that bring on unwanted results. But you’ve got to be willing to dig deeply to find out; you must pull back the layers of the mental onion and face your issues so that with the right tools, you can successfully resolve them. A “don’t bring me no bad news” outlook is going to turn you into a Sisyphus, the Greek mythological character that was doomed to roll a boulder up a mountain only to never reach the top. You’ll never reach the top of your trading goals, but will be doomed to push that boulder (your issues) until you run out of either energy or money and it’s usually the latter first; that is, if you are unwilling to look at your ego-driven, unconscious faulty beliefs. The smart trader accepts the challenge and realizes that trading to win is about the long haul.

So, you must decide which life strategy you are willing to undertake in the service of your trading. Will it be the courageous and comfort-zone expanding trading to win, where you are committed to growth and excellence? Or, will you reach for the easy button with a strategy based on not wanting to get outside of your comfort zone; avoiding challenging yourself and living by default with blinders on. The choice is always yours. Remember, trading to win where you are going as far as you can with all that you’ve got!

Happy Trading,

– Woody Johnson

wjohnson@tradingacademy.com

Disclaimer
This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.