Easy Come, Easier Go

 One very unfortunate-- or potentially devastating-- aspect of trading is the aftermath of how we handle gains. Much like with personal finance, we kind of just assume people who know how to obtain money also know how to manage and preserve that money <insert the "X" sound from Family Feud>. Traders who are fortunate enough to make it to the "other side" are much like athletes who have put nearly all of their effort into becoming good athletes, with relatively little thought put into how to handle the spoils of their labor. As a result, the aftermath of a win or winning streak is too often the tendency to give those gains back to Mr. Market once the psychological "win" is over. 

We often see that this is true not only following a nice multi-day or multi-month run, but even within a single trading day! If you're a day trader, how many times have you given up morning gains in the afternoon? Probably more times than you'd want to admit. The depletion of mental capital, coupled with the need to keep doing something in spite of changing market conditions, often results in a reversal in one's fortunes. 

One of the best things one can do is to simply step away from time to time, especially after a difficult trading session or even after an unusual win. We are lulled into thinking that this is the new normal, when in fact placing a follow-up trade with the same risk parameters is just asking for trouble. To prevent FOMO, it's best to think of every refreshed market level in the context of your willingness to participate, not in the context of the actual trading day. As an example, imaging having a great trading session for the first half hour after opening bell. You then purposefully step away, maybe get some coffee or breakfast, and come back after 20min. You see that the market has moved well beyond the levels you saw in the first half hour, and you shake your head and just need to do something to take advantage of this move as you start to regret taking a break at just the wrong time. Unfortunately, the market has recalibrated itself to this new level, with new dynamics in price action, and if you're in this state of mind, you're out of sync with the market. This is the perfect setup--for a big loss.

Only experience can truly embed the mentality that it takes to recalibrate one's self in this example, and to truly not have feelings of regret in not capturing the missed move. But achieving these two things is also the perfect setup--for retaining past gains and setting yourself up for future rewards. Happy trading.