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Bulkowski's Trading Revenge

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As of 02/15/2019
  Industrials: 25,883 +443.86 +1.7%
  Transports: 10,568 +30.06 +0.3%
  Utilities: 739 +3.09 +0.4%
  Nasdaq: 7,472 +45.46 +0.6%
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Tom's Targets    Overview: 02/14/2019
26,000 or 24,600 by 03/01/2019
10,900 or 9,900 by 03/01/2019
755 or 725 by 03/01/2019
7,700 or 7,050 by 03/01/2019
2,825 or 2,650 by 03/01/2019

Written by and copyright © 2005-2019 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners.

Trading Revenge

Basket Case Bob is learning to day trade, and he told me of his exploits. "I took a $500 loss on RIMM. I couldn't believe it! It just kept going down and down and down. And as soon as I finally sold my long position, the stock bounced. So what did I do? I figured the bounce was short lived, so I doubled down and shorted the stock, trying to make up for my loss. I lost another $1,000. Oops."

Picture of a lizard.

How many of you have made outsized bets after a loss, compounding the loss with another loss?

Slim Jim

Slim Jim's father was an authoritarian that made all of the decisions, including what Slim should order at restaurants. When Slim ordered something his father didn't like, Dad berated and scolded him. When Slim followed his father's advice, his father didn't reward him with encouragement. Dad said nothing.

This treatment taught Slim to be pissed at the world and to have things done his way.

Growing up, Slim rebelled, putting himself and others at risk of harm. The more he rebelled, the angrier his father became and the more punishment he inflicted on Slim. In college, Slim excelled as if to show his dad that he could prosper.

Slim Marriage

Slim married, had children, and inherited a money management business. The traits his father taught him meant he wouldn't delegate responsibility. He took on too many clients, blamed, yelled at, and fired others when Slim himself made the mistakes. It got so bad that the staff threatened to quit and Slim's family threatened to leave him unless he changed.

What changed Slim's mind was when his young daughter said, "Either change or I'll cut your heart out with a machete!" Okay, so maybe she only said he was a "grumpy daddy," but you get the picture.

He changed his ways and lived happily ever after until one of his pissed off clients found out Slim was running a Ponzi scheme. But that's another story.


Problems and Solutions

How do you identify and solve this problem?

  1. Discover you have a problem, preferably before a friend threatens your life unless you act civilized. In other words, what behavior of yours upsets people?

    Another approach is to ask what behavior offends you most in others? Do you share that behavior? For example, if you see a boss yelling at a secretary for stapling copies instead of using paper clips, do you act the same way? Ask others for their candid assessments of your behavior.

  2. Do you share your parents negative behavior, such as a violent temper?
  3. How do you talk to yourself after taking a loss? Do you call yourself stupid or other names? Do you berate yourself?

    If you say that you're stupid, the truth is that you have above average intelligence. If you tell yourself that you made a bad decision, the truth may be that you followed a system that loses 60% of the time. If you vow revenge, that you'll get your money back, the truth is that you increase the likelihood of additional losses. In other words, separate fact from fiction.

    If you call yourself stupid often enough, you'll begin to believe it, eroding your self-esteem. That could lead to making more trading mistakes.

    Try this. Visualize a black-and-white picture of your negative thoughts, one so vivid that you cringe when you imagine it.

    Picture of a lizard.

    Now picture the reward of trading success. This image should be in color and rich with detail. The more intense and real you can make it, the better this will work.

    In your mind, place the black-and-white image beside the color one. The color one should be larger, brighter, with more contrast and the black-and-white one should be postage stamp size, dull, and gray. Draw a diagonal black line through the black-and-white image with a circle around it.

    Whenever you feel like seeking revenge, pull up these two images. Reflect on what they mean, focusing on the rewards you can gain by following your trading rules and recognizing that losses are just the cost of doing business.

By comparing the two images, you can help persuade your mind that seeking revenge will not lead to trading success. If others tell you how damaging your personality traits are, imagine how happier they and you will be when you correct them. Correcting them can be as simple as realizing that one path leads to success and riches and the other leads to stress and unhappiness. The choice of which path to take is up to you.

-- Thomas Bulkowski


See Also

Written by and copyright © 2005-2019 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Some pattern names are the registered trademarks of their respective owners. The first myth of management is that it exists.