I’m undertaking a 1000-day reinvention project, blogging here daily to track my progress. In Tuesday Book Club, I share an idea from a book.
In the Preface to his book Best Loser Wins, trader Tom Hougaard writes:
How you feel about failure will to a very large degree define your growth and your life trajectory, in virtually every aspect of your life.
In trading, key to responding to failure — to losses — is to find equanimity in the face of it, he writes:
I have conditioned my mind to lose without anxiety, without loss of mental equilibrium, without emotional attachment, and without fostering feelings of resentment or desire to get even.
The drive to get even after losses is particularly insidious and dangerous. When you lose big in your life, whether losing money or something you cherished, and you try to get back to where you were, you’re distorting your attention. You are focusing on the past and what you used to have. You see new opportunities according to how well they reproduce past achievements. Instead of living in the present, and seeing the present as it is, and for what it offers, you remain mired in memory.
Letting go of the need to get even, to get back to where you were, relates to another piece of advice from Hougaard’s book: forget your mistakes and move on. Trying to get even is a form of fixating on your mistakes. When you try to get even, you measure your present and your future by the past, instead of bringing a fresh perspective that appreciates what you have now for what it is rather than imposing memories of the past onto it.
trading allows you to become a different person
Hougaard suggests that each trading day, you start by reaffirming your purpose. I’ve started doing that, by writing my purpose and the day’s intention in my daily trading note.
I write a daily trading note each day. I do it here, on this blog, but the notes are kept private. They serve only as a way to log my thoughts and ponder my trading for the day.
My main purpose in becoming a trader is as part of my total midlife transformation. I want to become an entirely different person, someone who doesn’t live with regrets about or fixation on the past, someone who approaches life with verve and confidence, someone who falls down and then gets up again.
Learning to accept failure and move on from it is key to this transformation.
Hougaard writes:
A significant part of your success as a trader is correlated to your relationship with failing. If you see failure as the endgame, then you won’t make it as a trader.
Failure is not an endgame. Failure and losses, and making big mistakes, whether with developing a system or executing on it, is part of the trading experience.
By learning to deal with failure in trading, I learn to deal with it in all aspects of my life.
Today’s going to be a day filled with failure
Yesterday I started enacting new trading rules I have been developing, ones which, following Hougaard’s advice, led me to double down on winning sectors (semiconductors and other electronic tech) and close out some losing positions.
Now today semis are way down in premarket trading. I’m going to be seeing big red losses on my positions page. Today, I have the ideal setting to practice not just accepting failure, but cutting losses according to new rules — should those rules be triggered.
Here is how Hougaard prepares for the ups and downs of trading:
I deal with fear when I am in a trade by having an exit strategy. I have a stop-loss, which defines the size of my loss. I have accepted this loss before I started the trading day. It is part of my trading plan.
I will have mentally prepared in the morning, ahead of the trading day. I will have sat quietly, contemplating what I am about to do. I will have subjected my mind to images of me losing. I will have calmed my mind, when it experienced these imagined losses, so as to negotiate away any feelings of anxiety and regret, as well as desires to get revenge and get even.
I will have dealt with hope by accepting that my stop-loss will define my exit. Maybe I will win. Maybe I will not win. Before the trading day started I will have gone through mental exercises that saw me enter the market, observe the market move against me, negotiate with my fear brain and the impulse urges it sent to my conscious awareness.
Before the trading day today, I’m going to imagine what it would feel like to exit positions I entered yesterday because they are already seeing losses big enough to trigger closing the positions. I’m going to meditate on the possibility of failure. I’m going to imagine what it feels like to see my new trading rules immediately “fail.” But they aren’t failing if I get out quickly with defined losses, and without my holding onto them in my mind.
I don’t subscribe to the cliché that “everything happens for a reason,” so I’m not going to say here that this immediate failure, these immediate losses, when I’ve just begun a new trading regime is to my benefit or is for my learning.
I will instead lean on another cliché, “it is what it is,” and go further than that and affirm that this is my life, this is my fate, and I love it, just as it is. Let me practice amor fati today: this experience of leaning into the semiconductor sector and seeing it blow up the very next day.