Harry Dinkleburg just lost his beer money on a Cable short. He blames the market, flexes his fingers, and then aggressively shorts all the pound pairs with huge forex position sizes. He then loses his son’s college fund on the same day, so he calls it quits and ends the day before lunch.
Harry Dinkleburg lacks vigor, or the ability to function well in the face of psychological stress.
Instead of moving on from a losing forex trade, he aggressively took on risky trades in an effort to regain his losses. And because he was trading on emotions, his trades went down the drain.
Just like in life, forex trading requires that you keep your balance even when you’re under tremendous physical and emotional stress.
Take Chris Gardner from Pursuit of Happyness for example. He lost his wife and his home after he quit his job in the medical field, but he remained resilient and focused on the tasks ahead. His persistence eventually made him an employee of Dean Witter Reynolds, a brokerage firm, and even the CEO for his own firm, Garder Rich & Co.
Vigor and Forex Trading
When you lack vigor in trading, you treat each forex loss as a personal failure, when the truth is that these individual outcomes matter very little in the grand scheme of things. When a trade goes well, you feel good and everything is fine and dandy.
But when you encounter a loss, you feel frustrated and disappointed not just with trading but with your life as well. Because of that, your ability to make sound trading decisions is compromised and you end up either taking revenge trades or refraining from taking any trades at all.A great way to react to losses is to analyze the results, review the trade setup, and figure out what went wrong.
A trader who lacks vigor and resilience would be far too frustrated to take this constructive approach.
What more if he suffers a series of consecutive losses or a large drawdown? Unless he weathers these losses with resilience, he could end up falling into a depression spiral like Mr. Dinkleburg over there, which could further hurt his trading.
To be a consistently profitable forex trader, you need to build your vigor. To do this, you need time and experience.
Time and experience will allow you to easily adapt to losses that may seem way over your head at times. The more familiar a negative situation becomes, the easier it is to cope, and the stronger you become.
A trader who has experienced repeated losses will have something to draw upon when he experiences a large drawdown. He knows that any drawdown he experiences are merely small setbacks, and that he’ll eventually be able to get back on his feet and reach fresh account balance highs.
Remember, every setback is a chance to build vigor.
As a newbie trader, it will be very hard to remain vigorous during times of emotional stress -but this doesn’t mean that you have no recourse!A good habit to develop before taking any trade is to first imagine the worst possible result. Visualize how a person with vigor will feel and react in the event that he gets stopped out.
Because you rehearsed your reaction in your head, it will be easier to respond if you actually experience the loss. In a way, you have built vigor without actually experiencing the loss yet!
A vigorous forex trader is the one who can stay level-headed even after a loss. That is what YOU want to become. By having vigor, you avoid taking losses personally and therefore come out as a better and stronger trader.