I'll give you a perfect example of how fear can wreck your portfolio. I bought one thousand shares of RS at 33.32, with a mental stop at 30.85 on 10/11/06. I purchased the stock because I am pretty positive the company will have an earnings surprise tomorrow. I watched the stock go all the way from 35.99 to 34.33 today. Years ago I would have sold this stock to protect my profits. Today I added to my position by another 400 shares. Why? Because I have no fear because my plan is still intact. Now it may turn out I would have been better off to sell today, but that does not matter to me. I have stuck to my plan which I believe is a sound plan. I may be wrong, but I am not afraid.
Self sabotage and fear are two different things. For example you have "no fear" taking this position. But wouldn't it be considered "self-sabotage" to take this trade to start with ?
You are correct. Even though I don't think it is a philosophical issue, but physical innate condition. I also think this "phenomena" manifests itself most acutely in an environments like trading where there aren't any limits to how much pain a person can inflict itself, as long as their is a way to pay for it. Probably the wrong forum to try to discuss a universal issue affecting all human beings in general, too broad indeed. Peace out...
No because it actually came up on my system as a buy. I normally never invest in my industry. I am a direct competitor of rs albeit not a large one, but they are one of my largest competitors. When I did further analysis of my company forecast for the third quarter I was more than 30% shy in sales and 60% shy in profits from actual results. I noticed that RS actually raised guidance and increased their range but only by 20%. They should do much better than this. My basis is sound. edit: now they could give terrible guidance and the stock would go down, but I don't believe they will do so because so far my business is even better now than it was in the 3rd quarter.
I think most sabotage comes from anger, not fear. You practice for days on end maintaining discipline and then one morning you do everything right but you still lose three trades in a row and you suddenly blow it. Has happened to me a number of times.
I never made any money until I had a full time job at the same time. Now that I don't need the money it's easy to conform to my criteria and out of control plans. But as I ramped up volume for the first time over months, the fear of loss made my trades too careful, too conservative. I know that because my hold time went down significantly, I didn't let winners run out like I would on small size. My winning % was the same. So I'd say fear, along with not recognizing that it wasn't a good trade just because it was over $100 (because there wasn't a reason to get out, I just wanted to bank it). That played out for weeks until I realized what was going on and reverted to my old ways. Yeah, I'd say very few people are out to self-destruct. Those are gambling types who feel comfort knowing they're still there after getting crushed.
I guess I can't relate to this. I see no point in getting angry at a stock, myself, or a specialist. If it was my fault I just learn from it and move on.
A definition of Self-Sabotage: When you do something that is not the thing you wanted to do even though you know (maybe 300ms later) that it is the wrong thing. Examples: Not taking a trade that meets your system parameters (fear perhaps) Taking a poor trade immediately after a loser (anger, revenge) Taking a poor trade when bored (seeking excitement, validation) Lots of different emotions. Common factor is that you know what you should do and when calm and cold thats what you want to do but you do something else instead in the heat of the moment.
All of which are the result of one thing....lack of discipline. Now what causes lack of discipline? Ego? Maybe! Poor preparation? Maybe! Lack of conviction? Maybe? Is there a theme going here? Yes! I just don't think you can pin this down on any single emotion. On any given day, any, or all of those emotions can be out of control. Like anything else, the more you do it, the more comfortable you become. The real question is, will the money run out before the comfort level comes? Bottom line.....improper capitalization to begin with is the root cause. Why people do that is a whole different topic.
someone already mentioned how they say Fu** fear. that is exactly what I do even nowadays after I place a trade I go "I already lost" and I imagine I did, so if its a loss, not a surprise but I guess I do expect a win too, after all this time so never mind I am confused man by the way guys, I bought 300 000 worth of ES. if it goes up tomorrow, remember me and say cheers. if it goes down, say Poor guy, never had a chance