This is a Guest Post by Yvan Byeagee. He is one of my personal favorite teachers of trading psychology. His website is at TradingComposure.com.

Back To Basics. How To Go through Losses Without Losing Your Mind

Sometimes a short story can teach much more than an entire book.

In today’s post, I want start by sharing the story of a young martial arts student who was under the tutelage of a famous master.

One day, the master was watching a practice session in the courtyard. He realized that the student was struggling in the practice.

The master could sense the young man’s frustration. He went up to him and tapped him on his shoulder.

What’s the problem? he inquired.

I’m not good at this! said the young man, with a strained expression,  no matter how much I try, I am unable to execute the moves properly. I’m just not good!

The master looked carefully as the student engaged in sparring and, indeed, he found that the young man’s body would become tense. What’s more, his mind seemed perturbed.

Before you can master technique, you must understand harmony. Come with me, I explain, replied the master.

The teacher and student left the premises and walked some distance into the woods until they came upon a stream. They both stood there in silence for a few moments until the master finally spoke.

Look at a stream he said. There are rocks in its way. Does it slam into them out of frustration? Does it stop flowing? No, it simply flows over and around them and moves on!

What can you learn from this? The master then went back inside leaving the student there.

The young man sat and spent a few moments to reflect on this. Soon enough, he came back to the courtyard and, this time, nothing could come in his way of executing the most perfect moves.

Be like water and you will know what harmony is

All too often, we tend to be hard with ourselves. We let losses get to us. We feel bad about our lack of progress. We feel guilty that we haven’t been as disciplined as we wish we could have been. We regret the actions we took.

This is a strange case of looking at the glass half empty, and this kind of thinking almost certainly hinders our progress.

Here’s what I propose instead: Take the long view, both behind you and ahead of you.

Okay, you might have screwed up on a few trades this month, but at least you took your chances. You can only learn by taking action even if that means making mistakes.

No matter how much you repeat those mistakes over and over again, you will eventually learn, until comes a time when you won’t make those mistakes again. You get the point: Losses only serve to make us stronger. They’re learning experiences!

You see what I mean? Look at the glass as half full. You are exactly where you need to be!

Water flows

Don’t let your afflictive feelings and thoughts get to you. They’re conditional appearances in your mind.

Conditional! This means that they’re reactive internal processes to external stimuli.

Thoughts and feelings are inherently there to protect you, and they came to be through a long chain of evolutionary processes that occurred over thousands of years.

But in this day and age, they seem to hinder more than they protect.

So it’s important to find a way to deal with them. And the first step is to acknowledge that your thoughts and feelings are not you.

The simple fact that you can observe them and be aware of them objectively is proof of that.

So learn to deepen that capacity to look at your thoughts and feelings objectively. Learn detachment. And above all, focus on what’s happening now.

The future is completely open and we are writing it moment after moment, after moment. Realize this. The only intelligent response to a losing trade is curiosity and learning. Sadness? No. Despair? Nope. Just learning.

A long road

We will always feel guilty about what we have or haven’t done, but it is important that we remind ourselves time and time again that it’s the journey that counts.

If you trade small so as to minimize your chances of blowing up, and if you focus on learning, eventually you’ll get somewhere.

Nowadays, when I go through drawdowns, I always tell myself that losses are just small bumps on a LOooong road.

Our limitations only exist within the confines of our own mind. Realize this and you will find strength!

For more posts like this, consider signing up for my weekly newsletter (http://tradingcomposure.com/start-here/ ). I will help you improve your mindset, simply, without the fluff or the esoteric language, as you trade your way to financial freedom.

For more articles by Yvan Byeajee here on TradingComposure.com and you can follow him on twitter @yvanbyeajee.

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