We’d just settled into a conversation around performance in trading, when my podcast guest,Mark Randall, said, “Trading is war.” Even as he was grinning with a twinkle in his eye, he was quite adamant about it. I laughed. And yet…
He told me, during his time trading in the pits, he’d seen people killed by the stress of trading. Heart attacks. Suicide… more than he could count on both hands. He once returned to the office to find a seasoned pro stiff in his chair. He wasn’t sleeping, or ruminating over a loss - he’d had a stroke.
We’ve all seen scenes in movies of traders’ losing their shit to euphoria - funny, grotesque, a prelude to massive comeuppance. We know what that feels like, even if we’ve never been quite so lucky. We’ve also seen traders in movies looking low and depressed immediately following a shocking move in the markets. But nothing you’ve seen on screen prepares you for the first time you experience your own first big loss.
It’s like you’re in the water, the boat has gone, and you’ve just spotted a shark fin. There’s blood in the water, and it’s yours When you look at your open positions on your screen, and you see they’re all turning red, as a beginner, your heart starts thumping, your palms break out in a sweat, your chest pulls tight. You fight the urge to run… and then… you panic.
Splashing about in the water like an idiot, you start closing positions. You click the deposit icon on your dashboard. You click ‘Fund now’ and ‘Save payment methods’. You select your card and tap in a figure. Will it be enough? No idea? Try a small amount first. You proceed with the payment. A pop-up gives you a green ‘OK’. Your margin percentage gets a little bump - from 70% to 74%.
Within a minute, the market has washed away that little gain and you are now on 69%. At 50% margin, your broker’s bots will start gobbling up your losing trades until your margin percentage is back up, to a point above 50%.
You are now at 65%,…63%… 62%. That fin is circling. You can see the body of this thing now.
You’d better start closing some of these trades. Even the heavy losses.
You hit that little x beside the negative number to make it disappear. -£450.32… gone. -£348.72… gone.
Your margin bobs up - now at 72%.
A shot of relief spurts through your body countering the waves of fear.
73%, 73.8%....
You draw in a deep breath and hold it for four four seconds. Exhale slowly. Your skin is prickling all over. Your palette is dry. The tip of your nose is tingling. The shark keeps circling. Look away.
Your eyes are glued to the screen once again. 62%. Christ. Just when you were hoping for a reprieve. Don’t hope. Hope is not a strategy. How many people have said this? Don’t hope. It always goes wrong when you hope.
Do you make another deposit? This is gambling behaviour. Emptying your account to feed the shark. Enough.
As you peel your eyes from the screen, you step back into reality, and your kitchen. You pour yourself a glass of water. Somehow the liquid feels wetter in the mouth than usual. The buzzing in your ears drops off. You could burst out laughing, except you don’t want to scare the cats. Why on earth do you put yourself through this shit? Again and again.
It occurs to you: brokers’ disclaimers should come with a health warning above the warning that you are putting your capital at risk. Is that supposed to be funny? Nothing’s funny right now…
You return to your trading den. 84%... 85%... The shark fin has disappeared. That doesn’t mean you’re safe. But maybe you have some time, some thinking time. Make use of it.
If only you could: your work computer has made that slightly nerve-wracking sound that summons you to another Teams call and a gathering of people in webcam windows.
The call over, you glance at your laptop.
92%... 93%...
Do you look at the losses? No, too bloody. No more blood. Like Mark said, this is war. You should always focus on stemming the blood flow, not the thing you lost.
The next morning…
…your account is gone.
WTF!
Slapped in the face, you gaze stupefied at the space where your house was standing. Are you seeing things? Is this the same account? You can’t understand it. As you went to bed, things were looking up. And now… this is…
You stifle a laugh, a cry, a whimper.
It occurs to you: You should give up this stupid fight. Clearly you’re no good at it. Have you enough cash left over to pay a coach to get you back on track? Find some other side hustle?
You peer into the open grave of closed positions. All those hours of work - numbers in red, broken bodies now.
You stand there, stunned, house keys in your hand, no front door lock to stick them in to.
It occurs to you: You have a choice: admit defeat or pick yourself up.
Fast forward a couple of years, and, after a stressful day managing the day job, frayed and embattled, you find yourself in a similar situation to the one just described. 80% of your positions are haemorrhaging fast. Your email inbox is stacked with MARGIN CALLS calls. They all begin with the word: ‘Urgent’.
So. Here we are again. Immediately you regret that coffee at 8 a.m. because it’s just turned to acid in your stomach, an accelerant to the cortisol rushing through your veins.
At 70% margin, you make a deposit. It gets washed away in less than a minute.
At 65%, you make another deposit. At 62%, you close a couple of trades carrying small losses. You are still sinking. At 61.4%, you check the charts once again. The move against you is losing momentum. But it’s not done with you yet.
Instead of closing entire positions, as you would have done as a beginner, you trim losses to a couple of positions by fractional amounts, across three accounts.
Now at 80% your margin is steadily climbing… The ‘treatment’ appears to be working. You’d clench your fist, except you don’t do that anymore. This ain’t over, you know that too well.
By mid afternoon, your margin is up to 121%.
You’re not aware of feeling relief, you feel almost nothing. You wonder if this is similar to how your grandad felt after fighting three years in the trenches in France, always blood and mud under his broken nails, numb to loss.
You make a note to yourself to be careful. No revenge plays. The less you do now, the better your chances of not inviting further chaos into your day.
You don’t think about the losses, they are just numbers. You attach no emotional or personal value to them. You don’t reflect on what you could have done with the money you lost, it is simply gone.
You’re vaguely aware of a band of tension growing tighter around your forehead, but the most you feel is an absence of fear.
You focus on the account which has suffered fewer losses. On this one, your margin stands at 282%. You have some ammunition to spare. Just remember, your brain is still in lizard mode, still primed to make a rash decision, even if the worst appears to have dissipated.
From your watchlist it would appear Crude Oil is your best bet. This will be your only focus now for the rest of the day. A viable set-up is not far away, perhaps an hour… call it two. You must wait. Like a sniper. If no clear sighting of target, you do not pull the trigger.
Later that evening, after the markets have closed, you reflect on what happened. You note that your controlled reaction to a violent wave of volatility suggests you are performing better these days. Two years ago, under the same or similar circumstances, you would have panicked, and closed more trades than you needed to. You have learnt to trim your losses, almost as calmly as a tailor trimming his cloth to fit a customer’s measurements.
You are still in the game.
Stay resilient.