It was Charles Dicken’s novel Little Dorritt that brought up the topic of ‘Speculator’s guilt’. This the human error of risking everything on one trade or investment. Many warn of it, but what should you do if you have done it? Just sit down and feel sorry for yourself. No of course not. The BBC have done a great screen adaptation of the novel and it is a great watch. There is something for everyone in it, so a good family watch.
The impact of speculator’s guilt
What should you do when it all goes wrong? What should you do if this is what you have done? The impact of allowing a trade to turn into an investment can be utterly devastating. Here is an extract taken from just one person. This was from the GameStop option saga last year:
“Barring deaths in the family, this has been the most devastating two weeks of my life,” says Will Brown, a 30-year-old North Carolina fish farmer. He tried to reverse a $20,000 loss trading other stocks by plunking down his remaining capital—a few thousand dollars—in GameStop options. At one point, he calculates he had a position worth $300,000 or so, a sum almost entirely evaporated. “I’m coming to terms with the fact that I have nobody to blame for this but myself.”
You can rebuild
What many people don’t tell you is that you can start again. You may be just left with the words, ‘told you so ringing in your ears’. You may think your are starting from nothing. However, you are not. You are starting with the knowledge that you should never let a trade turn into an investment as I wrote on Feb 03. That is, in itself, valuable. It is also a lesson that many, many traders have learnt before you. Including some great and very successful ones. No-one likes talking about losses, but all traders deal with uncomfortable losing trades and runs. Some hugely successful traders have also ‘lost it all’ in their trading past. Rebuilding can take time, and the losses can be painful. However, with hindsight, a large loss can actually be teaching you a profitable lesson that will benefit you during your entire trading life.
Here are some things to do:
- Pick yourself up
There is no point feeling sorry for yourself and down. Day 1 is the first day of rebuilding. So, start to look at ways of how you can build again. You may need to be creative. You have lost your spare capital and need to build it up again. So, that is now your focus. Is it starting that business you always wanted to? Could you sell online alongside your regular job? Could you re-budget in order to start building your capital again? Obviously, this will be different for everyone due to different personal situations and time of life etc. However, whatever your situation you can start planning your recovery. It will give you a positive focus which is necessary after such a negative blow.
You may surprise yourself at what can be done when your back is against the wall. Accept that you may need to stop trading if you have lost all your trading capital. Maybe for a 6 months to 12 months. Use this time to start educating yourself about trading with more discipline. Close your broker account. Re-set your mindset.
2. Reach out
This is a time to reach out to others. Do you have some trading friends that you can trust?
Learn to manage risk. Learn what drives the markets. Learn about your trading strengths and weaknesses. Proper risk management involves having a good understanding of markets. Getting 1:1 help is crucial in making that steep learning curve shorter.