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Regret in trading

Either it was this great trading opportunity you missed or a trade that lost you more than it was originally planned, regret is one of the most commonly experienced emotions in trading. Something went wrong and you feel disappointed and  responsible for it-that’s regret.

All  emotions we experience in trading are interconnected-one precedes or follows the other, one is at the core of the other, or everything is part of a larger emotional cycle that all traders go through. We always try to banish unpleasant emotions from our lives which as we have seen earlier  in Emotional Control is completely futile. We always struggle too hard not to have a certain emotion, not to feel sad, not to feel regretful, not to be anxious. We are trying with every possible way: rationalizing, justifying, arguing with our emotions. We distract ourselves perhaps by engaging in an activity,socializing, drinking, running. That’s all good. That’s all great, immediate, short-term relief.

In trading, regret avoidance may lead us to engage in ineffective trading decisions that will eventually cause more regret. For example, it may encourage traders to hold losing positions too long or close winning positions too fast so that they secure some profit. If you recently had a significant loss , and you decide to take a new trade your mind will be probably telling you: “I cannot afford to lose anymore, the market will reverse sooner or later”, so you stay in longer than you should. This decision is based on another emotion, that is hope. Or if your trade is making some profit, you may choose to lock in the profit, which will often be lower than you originally planned, fearing that you may have a similar experience of loss.

In both cases,what traders do is trying to avoid further loss and further regret. But regret, like all emotions, carries a message. There are probably elements to be improved in our method of trading or there may be more willingness to experience inevitable losses that we must learn to cultivate. Once we learn to recognise regret, then we can also learn to respond to it in a more constructive manner and hopefully make consistent profits.