Whether they are the private investors or the wealthy and Wall Street professionals I treat in my clinical psychology practice in New York City, many of my clients are not particularly good at dealing with financial setbacks or failure. From my vantage point, the reality is that everyone faces difficult issues in their lives and must deal with adversity in an adaptive fashion, whether it is personal or financial in nature.
The number one quality that differentiates someone who bounces back after a disappointing event (like the stock value of Apple plummeting or a financial loss of some kind) from one who crumbles and remains passive is perception. In my practice as a performance coach and a clinical psychologist, I aid money makers in their quest to be financially successful despite the ups and downs associated with working in a highly volatile and uncertain stock market. In essence, I arm them with cognitive-behavioral skills to empower themselves over the daily failures and setbacks that are par for the course when one is working with stocks and global markets. Here are some tips for both investors and Wall Street warriors to help them stay in the game long enough to turn a profit, maintain their mental health, and enjoy their quality of life.
1) “Bullish thinking” is the ability to see the sun through the clouds. It is a cognitive technique that I teach my clients to help them maintain emotional discipline in the face of adversity. It helps them get back to the top of their game and prevents them from bringing their bad moods home. Mastering this style of thinking allows them to improve their overall quality of life and reap the financial rewards that they feel they deserve. Even the best investors can be crippled by irrational or negative expectations of their performances on each trade. Bullish Thinking is a way to identify the negative, often irrational thoughts that stem from how we perceive a life event such a failure or setback. If left unchecked, these “bearish thoughts” can create behavioral paralysis in a trader or investor, and consequently, one may make an emotional trade or decision. Once an irrational or maladaptive bearish thought is identified, it is important to shift gears, and explore alternative, healthier, more reassuring thoughts to attach to the specific event. These Bullish Thoughts tend to be grounded in evidence from one’s own trading or investing history and can usually be used as an anchor to reassure someone that they will overcome a setback.
2) Stop pressing: Whether it was a bad outcome for you on a trade or a loss on an investment, it is imperative to shake it off, clear your head, and try to be right only a few times over your next nine trades. Stop striving for perfection on every trade or investment you make. Individuals usually make the most money on a small percentage of their trades each year. Realize your mistakes early and reassure yourself that you only need to capitalize on a small number of trades each year to be successful. It is the quality and not the quantity of the trades that makes you more confident.
3) Law of Averages: As an investor, you must believe in yourself, your strategy, and your ability to make tough decisions when the heat is on. Each failure or negative outcome brings you closer to a chance to shine and make money. It’s the Law of Averages. Slumps are a normal part of a fluctuating cycle for both athletes and investors throughout a full season. Don’t get bogged down in episodic slumps. Let it all come down to the end of the season to measure your overall performance. Then you can go back and micromanage your winners and losers. As I often tell my traders, a bad day is part of the game. It is just a meaningless data point in your long season as a trader. Huge losses can be chipped away over one or two good days of disciplined trading. Even the best traders have horrific mornings or afternoons. That is part of the season, so why not allow yourself the comfort of realizing that losses can be overcome?
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