Trader routines and neuroscience to get you back on your game after a big loss

You did everything right—designed a trade in advance, executed it live just like you planned—and still ended up losing.  Taking a loss in trading is as normal as breathing.  No method of trading will ever work 100% of the time.  But sometimes being wrong sucks more than average, not because you ignored your risk and took a devastating loss.  That is an entirely different error.  But let’s say, for instance, your trade resulted in missing a huge opportunity in the opposite direction, and at the same time you feel depleted from too much techno music over Memorial Weekend PLUS your great-uncle dies.

So you’re a bit rattled.  Life knocked you off your feet, and it is either get back up or lie on the rocks until flies start helping nature decompose your carcass.

Traders are some of the most durable business people ever.  A few were kind enough to let me share their routines.

@Dawson_JE:

“After a tough and rough week or when I need to fully clear my mind…I like to hit Ancient Aire, [a] Russian bathhouse kind of place.  Go by myself and vibe,” the certifiable wiseguy also added, “Same with hot yoga.  While I hit the gym 5-6 times a week, the hot yoga is a completely different release.”

Pour whiskey. Drink. Repeat.

— the mothership (@mothership) June 3, 2017

@diggydoy: “read some zero hedge articles?”

My routine is to clean.  Not a normal cleaning, but cleaning ‘like I killed a guy’ which means eliminating all traces of bad ju-ju that could be lingering.  Sometimes it means empty out the kitchen cabinets and reorganize them.  Other times it is the garage, or a filing cabinet.  It is a deep-dive clean, opening the proverbial can-of-worms, and returning the chosen area to a more sustainable baseline. A cleaning routine may be backed by neuroscience.  Part of the book UCLA neuroscience researcher Alex Korb, PhD wrote back in 2015 called The Upward Spiral is regularly published as one of these ‘4 rituals that will make you…’ type-lists on the internet.  One of the rituals revolves around asking, “What am I grateful for?”

What am I grateful for?

Yeah, gratitude is awesome… but does it really affect your brain at the biological level? Yup.

You know what the antidepressant Wellbutrin does? Boosts the neurotransmitter dopamine. So does gratitude.

Via The Upward Spiral:

The benefits of gratitude start with the dopamine system, because feeling grateful activates the brain stem region that produces dopamine. Additionally, gratitude toward others increases activity in social dopamine circuits, which makes social interactions more enjoyable…

Know what Prozac does? Boosts the neurotransmitter serotonin. So does gratitude.

Via The Upward Spiral:

One powerful effect of gratitude is that it can boost serotonin. Trying to think of things you are grateful for forces you to focus on the positive aspects of your life. This simple act increases serotonin production in the anterior cingulate cortex.

I know, sometimes life lands a really mean punch in the gut and it feels like there’s nothing to be grateful for. Guess what?

Doesn’t matter. You don’t have to find anything. It’s the searching that counts.

Via The Upward Spiral:

It’s not finding gratitude that matters most; it’s remembering to look in the first place. Remembering to be grateful is a form of emotional intelligence. One study found that it actually affected neuron density in both the ventromedial and lateral prefrontal cortex. These density changes suggest that as emotional intelligence increases, the neurons in these areas become more efficient. With higher emotional intelligence, it simply takes less effort to be grateful.

Doing a deep clean forces you to take inventory of everything you have.  If you only possess items you truly love, then an organization routine is likely to result in you being grateful for what you have.  By the time you put everything in place, gratitude is likely.

When it was clear the NASDAQ was trending higher Friday, I was feeling morose.  Not upset, not sad or annoyed.  I was 100% morose.  Like if the guy in front of me did not let his foot off the brakes 2 seconds after the light turned green then I was on the horn and ramming my fist into radio.  When you regularly take to the pen, to write, you are driven to find specific words to describe a scene or action or feeling.  It turns out clearly defining your mental state is good neuroscience!

Label Negative Feelings

You feel awful. Okay, give that awfulness a name. Sad? Anxious? Angry?

Boom. It’s that simple. Sound stupid? Your noggin disagrees.

Via The Upward Spiral:

…in one fMRI study, appropriately titled “Putting Feelings into Words” participants viewed pictures of people with emotional facial expressions. Predictably, each participant’s amygdala activated to the emotions in the picture. But when they were asked to name the emotion, the ventrolateral prefrontal cortex activated and reduced the emotional amygdala reactivity. In other words, consciously recognizing the emotions reduced their impact.

Suppressing emotions doesn’t work and can backfire on you.

Ultimately, your job is to get back to work.  When you do, it might make sense to start out with a smaller position size than you would normally trade.  It is sort of like putting the training wheels back on while you rebuild your emotional confidence.  You need to get back up to size as soon as possible, however, else you risk falling into a lazy state of staying in one place in life.

Static, bad.  Growth, GOOD!

Having a routine ready for when you face defeat can keep you from making matters worse.  The more times you reinforce the habit, the more likely it will become second nature.  Even if you start your routine by ‘going through the motions’ it is likely to eventually appease the mind.  Less time is spent being destructive.

As important as it is to have routines in place for big setbacks, the real challenge is having a routine you follow after a major victory.  For the same, ego-driven issues we might experience in loss can sabotage us in moments of victory.  Sometimes even worse.

Do you have a habit or routine that has served you well?  Share it in the comments below and hit the tweet button below to share this breezy Saturday content with your people!

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