Day Trading: Stomaching A Major Loss

Posted in Stocks

Day trading is an extremely stressful gamble to take part in. It’s no wonder NYSE day traders have been known to have the highest suicide rates among all white-collar jobs. Probably one of the worst feelings in the entire world has to be losing money in real-time on a risky day trade. There is nothing worse than seeing your hard-earned cash evaporating on a computer screen, leaving you powerless as you lose it all. The worst part is as we hold onto the stock, in hopes that it will recover, we’re often just slammed with more losses. At the end of the day, you pretty much lose all sense of reality. Your brain’s dopamine is reduced to near nil, and you feel like you’ve wasted your life.

“Yesterday,
All my troubles seemed so far away,
Now it looks as though they’re here to stay,
Oh, I believe in yesterday.”

-The Beatles

Yesterday, by The Beatles, represents how I feel when I lose a few thousand in a day in the stock market. It stinks. You regret every part of it. You could spend a whole month day trading, make $10,000 on a $50,000 cash account, and lose it all in one day. One hour. Heck, a few minutes. If only there was a way to go back in time… to yesterday, when troubles just seemed so far away…

It’s been proven that losing money has a bigger emotional effect on the mind than does making it. I don’t remember the source (I believe I heard it on CNBC during Power Lunch), but losing money has a 2.5X bigger emotional response than making money. What does that mean? The effect that losing $1,000 has on your brain releases the same amount of dopamine as making $2,500. Crazy, huh? We really do hate losing our money.

However, there are ways to stomach your losses. There have been many times were I’ve wanted to call it quits, cash out, and go cry home about how much I’ve lost. But I don’t. I keep doing it, I keep riding the waves, and I never give up. Here’s how I keep going:

• Go crazy - get some stuff you don’t mind destroying and place them nearby your desk. Believe me, it’s better smashing a $5 RadioShack micro-RC car to pieces then punching your 21″ LCD and cracking the display, or tossing your iPod out the window. It can get pretty bad sometimes, so make sure you’ve got something to squeeze on.

• Get an aquarium - you’d be surprised how stress-relieving an aquarium can be for your work environment. When times are at their worst, just take a look at nature. The fish go round and round, nothing bothers them. You be the same. Try to control your emotions and learn from the fish: don’t give up on life (or stocks) and don’t let anything bother you or keep you from cherishing life, however pointless it all may seem at the time.

• Listen to loud music - depending on whether your workroom is a public office or your home room, you may or may not need headphones. Just jam out. I personally drive around town in my Audi A4. Nothing better than cranking up the two 12″ Alpines to max bass tuning out the buzz of the real world. Which brings me to…

• Go for a cruise around town - hop in the car, roll down the windows (if it’s nice, sunny, and warm outside), and drive around town. Though this may or may not be fun depending on what make and model of car you have and how comfortable you are driving, but however you feel, remember to drive safely, and you may just return home a little less stressed out.

• Grab a drink - this should be one of your last resorts, and should only be done amongst a group of friends. Sometimes it’s good to get smashed. With the stock market, getting drunk and forgetting about it may be one of the best ways to pull through a big loss. The second you sell your holdings of the stock, you lose your money. But forget about it with the aid of alcohol, let the stock recover the next day(s, weeks, months), and you may even make some money!

• Play a video game - it can be fun, even for adults. My personal favorite is GTA: San Andreas. Nothing better than runnin’ around town shootin’ up everything you see within a 100 foot radius. Just make sure you limit your anger to in-game. I don’t want to be held responsible for encouraging the next mass-murdering day trader tomorrow on CNBC.

• Have a love life - when the market closes and you’re done for the day, stop thinking about the markets. Call up your girlfriend and do something fun. Whether it’s watching a movie or having sex, you won’t be losing as much hair as you will sitting behind the computer mindlessly lamenting over your loss.  Having someone there for you is probably one of the best feelings there is.

Good luck, and don’t forget to get some sleep. Sleeping trouble (only in the stock market, where making money is mostly a gamble) away is probably the safest way to reduce stress and improve your chances at having a better, energy-filled day tomorrow.