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Hello, Regret, My Old Friend…

Trading can be emotional. The market often has volatile moves and it seems new highs or the end of the world are just around the corner. In this environment, it’s natural for traders to be emotional. Of all the emotions traders deal with, regret is probably the most common.

In fact, I often joke that the default emotional state of a trader is regret. Consider some examples:

  • If you miss a move, there’s obvious regret.
  • If you have a trading system that only trades certain types of patterns or market environments (and you should), you’ll regret not being able to trade other environments.
  • If you have a losing trade, you’ll regret losing money.
  • If you have a winning trade, you’ll regret not being in sooner or holding a little longer.
  • If you have a winning trade that goes very far in your favor after you exit, you’ll regret you have trading rules.
  • If you don’t follow those trading rules, you’ll suffer all kinds of regret.
  • Even if you do everything perfectly on a winning trade, you’ll wish you had more size on. (You’re never big enough on winners!)

I could go on and on, but you see the point—regret isn’t just limited to losses. Sensitive traders will experience regret in almost every aspect of trading.

For some traders, this becomes a soul-crushing cycle that ends all hope of success, causes a cascade of emotional problems that extend beyond the marketplace, and can, in the most extreme cases, end a trading career.

What to do??

What’s the solution? Well, first, realize this is normal, and watch out for the experience of this emotion. Traders have different ways of dealing with emotions, but it’s pretty obvious that pressing the button on your trading software is probably the bad way!

Personally, I’ve cultivated enough perspective on my emotional state that I usually know when I’m compromised by some outside stress. (And trading against me at those points would be a very profitable trading system!!) Recognizing these points—which, fortunately, are rather rare—and simply not trading is part of the answer.

As for the day to day regret, my solution is to recognize the emotion and laugh at it. If you think about, it’s such a natural reaction that is so wrong, it almost is funny.

Just had a great winning trader and sad you didn’t break trading rules to hold it longer? “Hello regret, my friend. You are being silly. You know our only job is to follow the rules.

Missed a trade, and you’re sad about that? Maybe you want to bang into a random or ill-considered trade to make up for it? “Hello regret, my old friend. Not today. This is not how we die today…”

Had a losing trade, and you’re sad about that? “Hello regret, you’re back again. We know these losses are just a cost of doing business, and that I make more than I lose. Don’t be silly…”

Managing your inner dialogue like this requires a few things:

  • First, you have to have proven to yourself that you have an edge in the market and can execute it. All the positive talk in the world will not help if you are trading without a statistical edge. (Go walk up to an active volcano crater and think very positive thoughts before jumping in. Similar outcome to trading without an edge.)
  • Then you have to actively cultivate some emotional awareness. Meditation is one path, as is journaling. Pattern interrupts can stop you from acting on an emotional cascade.
  • Then, simply talk to yourself. It will seem silly at first, but once you see the change in your behavior, that silly practice might just save you a lot of money.

Of course, there are other paths and other emotions, but this is one that has cropped up in many conversations I’ve had with traders recently. Try my solution. Big changes in results can come from small changes in mindset.


Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.