Psychology of Trading, Part 7

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Dealing with Loss

In the summer of 2006, I left my job at Dell Computers.  I was planning to take a year off, which I did, before moving forward.  I spent my year off diving into my passion of investing.  At one point I became particularly consumed with the idea of peak oil (13 years later an idea debunked by the combination of US shale oil and QE).  At the time though, I needed to buy a new car.  I had been driving a truck for a number of years, which I loved.  However, with my study of the energy market, I decided to buy something I never would have before.  I bought a Prius.

When you transition from driving a truck to a Prius, it feels much like driving a large go-cart.  I loved the gas mileage though.  In the time I drove it, I sometimes would spend less than $40 a month on gas.  This was at a time when SUV drivers were paying out the nose for each fill up, and anxiety was on the rise.  It felt great to look at the display in my Prius and see the gas mileage I was getting.  In spite of its diminutive size, the salesperson who sold it to me described it as a very safe car.  It had a full roll cage and numerous air bags.  I never gave it a second thought.

At the end of my year off, I was researching a possible bear market in the summer of 2007.  At Thanksgiving the previous year my brother had broached the idea of a housing downturn.  He knew I was investing, and asked me what I planned to do.  I had no idea.  The dot-com bust happened after I left college.  I had not been involved with active trading at the time, but I watched the bear market’s effect on my family.  They weren’t prepared for how to navigate a bear market.  In the summer of 2007, I knew I wasn’t prepared to navigate one either.  I decided to get a job.

I had left Atlanta in 2003, but still had most of my closest friends there.  I wanted to explore combining my passion for investing with a new career choice.  I made some calls, found an interesting position with E-Trade in Atlanta, and scheduled an interview.  I was probably going to get the job.

The night before my interview I was driving from Nashville to Atlanta.  I was going to stay with some friends that night, and then make my way to E-Trade for the interview.  As I was nearing downtown Atlanta, driving down I-75, my mind was on what the new possibilities would hold.  I was pondering what the new job would be like, what doors it might open in the future, where I would live on this new adventure, and on and on.  I was excited by the possibilities as well as being around some amazing friends that I loved. 

The music was loud, my mind was racing, and then BAM!  I was spinning down the interstate at near 90 mph.  A young 14 year old girl was out joy riding that night in her mom’s enormous Suburban.  Not paying attention, she veered over into my lane, hit my right rear tire with her front left tire, and immediately sent my tiny gold Prius spinning.  Panic.  Adrenaline.  Screaming.

My car immediately hit another car, and my air bags deployed.  I could no longer see out of the front windshield.  My spinning continued and I hit another car.  I remember screaming out, “Jesus!  Help me!”  I became conscious of the fact that I could die in that moment.

Moments later my car rear-ended the retaining wall dividing the two sides of the massive interstate. It was a violent collision, although I had probably slowed to around 40 mph at that moment.  Mercifully, my Prius came to rest on the inside shoulder of the interstate, neatly tucked away from the interstate traffic.  The car smelled like gun powder, a side effect of the air bags deploying.

My car had come to rest backwards, facing the on-coming traffic.  My immediate thought was, “get out”.  I reached for the driver’s side door, and it would barely open as the car was badly damaged.  With my surging adrenaline, I immediately leaned back and kicked the door open in what is still the most masculine display of my life.  As I got out of the car, I realized I wasn’t wearing shoes.  I reached back into the car to get my shoes, phone, and wallet. 

I wanted to get away from the car as quickly as possible.  The traffic on the interstate never slowed down.  I started walking back up the interstate, getting ahead of my car in case anyone accidentally hit it again.  When I felt out of immediate danger, I became conscious of feeling alone.  I was on the inside shoulder, and the other cars involved in the accident were stopped on the opposite side of the interstate, across six lanes of speeding traffic.  I remember looking across the interstate and seeing the young girl who hit me being consoled by the other drivers involved.  I was thinking, “Why did no one stop?”, “Why is no one here helping me?”, “Why did no one even slow down!”.

I called my friend to come pick me up, and moments later a police officer was arriving to take me to safety.  I survived that night.  I left the accident uninjured, with only a small burn on my neck from where the airbag singed me.  The Prius, however, did not survive.  It was totaled.  I never took any pictures of the sight of that car, and no one ever saw it except for me, the police officer, and those involved from across the interstate.  Those who love me are glad they didn’t, because it was a horrific sight.  As I left the scene, I realized that I wasn’t alone, and was thankful for those that did help me that night.  The police officer who showed up to take me to safety.  My friend who came to pick me up.  My prayers that were answered.  A night that could have been drastically different ended with no one being injured.

My body was uninjured, but my mental state was not.  That night after detailing to my friends and family what had happened, I lay in bed attempting to sleep.  It wasn’t going to happen.  I have never felt the amount of adrenaline I felt that night.  It was like binge drinking a case of Mountain Dew spiked with Red Bull.  I was wired.

The next morning, I cancelled my interview with E-trade.  A family member came to take me back home to Nashville.  The emotional effects I felt after that accident were numerous.  I stopped driving at night for a number of years.  If I was driving on the interstate, I would avoid the middle lane, or suffer extreme anxiety.  I became hyper-sensitive to others driving near me.  If I was driving on a side street slow, and someone made a slight move to come out in front of me, I would veer noticeably and slam on the brakes.  I was easily angered, yelling and screaming at drivers near me.  I wasn’t myself.  I had changed.

I have told that story probably close to a hundred times over the past twelve years.  Talking, writing, and sharing the story, are a part of the process of healing the emotional wound.  Psychologists would term that integrating the emotional experience.  After twelve years, the shock and power of those emotions have eased.  I drive at night now, and don’t think about it.  I drive in the middle lane now, and don’t have any increased anxiety.  I drive slower now.  I drive Volvo’s now.  I’m much more safety conscious, but it no longer inhibits me.

I share that story here as it relates to how to deal with trading loss.  A large trading loss can be a traumatic experience.  Grief is involved.  The process of grief must be pursued before being able to move forward with a healthy mindset.

Are you attempting to get back what you lost quickly?  Or, have you accepted that it is gone, and ready to continue steadily building from where you are now?  Are you comfortable talking about the loss, or is there shame or denial involved?  When the subject gets brought up, do you experience enormous anger?  These are all red flags that you have not fully grieved the loss.  Trading from this place will not put you in position to be successful. 

Being honest with yourself about what you are feeling when you execute a trade after experiencing a significant loss is vital. I want to be trading from a place of genuine confidence, comfortable with myself, comfortable with the level of my account balance, and comfortable with putting myself in a position to steadily build.