THE BIG EGO – Sticking to Losing positions ?

A BIG EGO reflects an exaggerated view of one’s abilities. Such a mind-set can be fatal for trading, where accurate and realistic perceptions of one’s skill level are crucial. Just as with any pleasurable activity, telling yourself that you are a smart and brilliant trader has its time and place.

A big ego  is dangerous to be solely motivated by big money and bragging rights and if you allow yourself to be motivated to seek out these goals to build yourself up, you will be putting too much of your identity and self-worth on the line with every trade. This approach will fail in the end. You will put too much pressure on yourself to succeed. You will put yourself under extra stress and may “choke” at critical decision points while trading.

So when you are trading, keep your big ego under control. How do you control a big ego? It is not easy. It requires brutal honesty when assessing your trading skills. You have got to get an accurate assessment of your skills, identify your weaknesses, and build skills to compensate. Focus on performance rather than potential rewards to your ego and social status. Doing so will help you control your big ego and prevent it from marring your trading record. Many traders have a big ego, and many traders have failed because of it. If you have a big ego, learn to control it. Your long term success depends on it

How EGO  Helps in Sticking to Losing positions 

From a psychological point of view nobody wants to sell at a loss as in most situations in life making mistakes and admitting them is associated with being a loser. That’s why most people prefer sticking to a losing position. They don’t want to be labeled a loser. So they start hoping their position will turn around and end up being a huge winner. The stock then keeps tanking. Then they hope they will be able to sell for a break even. The stock then goes down even more. That’s when being objective and balanced isn’t possible anymore. Losses have become huge and they are trapped.

The cost is simply huge. You lost money. You lost time. There’s an opportunity cost as well as during that time other stocks would have made you a profit. You lost huge amounts of energy as you couldn’t get this stock out of your mind.

Notice I’ve made ample use of the word ‘huge’. Avoid huge losses at all cost. Avoid thinking in terms of huge gains as well. Stay balanced. Stay focused and calm.

Another Most Probable reason is EGO

Let the market make the decisions, not your ego.

The rules are not hard to understand. Recognizing a profit from a loss is simple. If the rules are easy to grasp and a profit is distinguishable from a loss, where does the problem lie? What makes it so hard to apply the rules? There is something within each of us that has a power over our minds that prevents our acting according to what we have agreed is the proper course of action. That something is present in all of us and is very powerful, more powerful than anything I know. Let’s call it ego. Until we learn to get rid of our ego, we will never make money in the market consistently. Those who haven’t identified the ego’s ways will eventually be destroyed in the market because of their ego’s tendencies. It is just that powerful. The market rewards those who have subdued their egos. Those who rid themselves of their egos are rewarded greatly. They are the superstars of their fields. In the market, rewards come in the form of profits. In the world of art, masterpieces are the results. In sports, the players are all-stars and command enormous salaries. Every pursuit has its own manifestation of victory over the ego.

 What is the ultimate rationalization of a trader in a losing position? “I’ll get out when I’m even.” Why is getting out even so important? Because it protects the ego.

I became a winning trader when I was able to say, “To hell with my ego, making money is more important.”

“Everyone wants to feel like a winner. It’s tempting to pat ourselves on the back for making a winning trade, but it’s essential to face the facts: Many times a winning trade is a combination of an astute insight AND being at the right place at the right time. In other words, external circumstances such as plain good luck make you a winner.

When you put too much of your ego on the line with your money, you may feel great when you win, but on the other hand, you may feel discouraged when you lose. When you allow your ego to enter your trading, you put subtle pressure on yourself to succeed. This added pressure could compel you to make dumb mistakes like holding on to losing trades to avoid hurting your ego. It’s better in the end to take a professional approach to trading marked by objectivity and rationality. Sure, it is necessary to have a passion for what you do, but it is not necessary to get a swelled head.”

Indeed, one of the most important things you can learn is to keep your ego under firm control so that you’re never in the position of having to protect it when you’re wrong. Doing so is usually a costly mistake, even though we all let our own egos (and yes, that includes me) get to the best of us sometimes.

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