Just like with almost everything in life, trading can cause regret. Whether it’s for a missed opportunity or for a wrong decision, those little red and green numbers have the ability to push us into some pretty extreme emotions.
Regret can control our behavior because it happens right after we’ve had a bad trade. It freezes us before we open a new one because it says in a pretty clear way “you were wrong”.
We usually, if not always, want to feel that we’re making the right decision before acting on it. We want it to be painless and risk free, no chance of failure. But trading doesn’t work that way.
The challenge about regret is that it can happen in different circumstances. We can experience it both when we’re actually trading but also if we’re on the sidelines without any exposure.
You can make a terrible decision and lose your whole deposit (or even more) and feel a whole mix of negative emotions, not only the one we’re talking about now.
But you’re also prone to regret when you don’t take a position – now you’re missing out! You see the market moving exactly as you thought it would but you’re not making any profits.
Here comes the good part – you can actually use regret to improve your trading.
Observing yourself is an important part of being on the markets and you can do it in a consistent way with a trading diary. In it you can put down your thoughts and notes not only about trades but also about your reasoning for opening and closing them.
Knowing what you did wrong, feeling bad about it, are the first steps to improvement. You can use regret to fuel yourself and get it right the next time.
It’s how you respond to losing trades and mistakes that creates the building blocks of a winning mentality and strategy. Instead of feeling sorry you can regroup and double down on analyzing your mistakes and reevaluate your decisions.
And then you go again.
When things don’t go exactly to plan it’s crucial to have the correct mindset to deal with the situation. Feeling sad for yourself, disappointed that you did something wrong doesn’t help you or your trading.
Breaking down the trade’s components – timing, size, stop loss, take profit, reason for opening or closing it – is what needs to be done.
It all comes down to action and risk. Being held back by something negative stops you from progressing and taking calculated risks is what it’s all about. In life and in trading.