Don't trade angry. Seriously. If you're considering an investing decision and you find yourself feeling angry, stop, walk away, and go do something less destructive, like headbutt your bathroom wall or drop a cast iron skillet on your foot.*
Wrath (or "anger" if you prefer a less Old Testament way of putting it) is another of the Deadly Sins and possibly the most destructive.
In this series of commercials the trading company sites this deadly sin as the impetus for using their trading platform. They even put it in the slogan - "Don't get mad. Get E-Trade" - They even offer their service as the means of "getting even" (read: revenge.)
Let's take a quick look at this emotion and what makes it a Deadly Sin of Trading.
1) At its root, anger is a coping mechanism for pain. We don't feel anger first. We only feel it in response to pain or a perceived threat. Sometimes it takes us awhile to get mad. Other times it's reflexive. That's not a bad thing. There are many situations in which being angry can be incredibly helpful. Investing just isn't one of them.
The best way to deal with anger is to eliminate/mitigate its cause - i.e.,the pain or fear that precedes it. In the case of this commercial not experiencing pain at the good fortune of others would be a start (see envy).
2) Whereas fear (anxiety) tends to inhibit action and paralyze us, anger leads to action - usually impulsive, aggressive, highly regrettable action. To quote Will Rogers, "People who fly into a rage always have a bad landing."
The worst decisions you have ever made, the ones you most wish you could take back were likely committed in anger. The same holds true for investments. Whether it's Twitter or a trade, it takes less than a second to "hit send".
3) Anger leads to revenge. Not only does the commercial acknowledge this, they revel in it. The "revenge trade" in which you feel motivated to "get back" at a person, or a position that hurt you, or... just life, is truly a bad idea.
I have mentioned before that people often believe they are trading in pursuit of financial goals, when in fact they are trading for (often hidden) emotional goals. Nowhere is this more apparent than in an anger-motivated revenge trade. It starts with experiencing pain. Usually in the for of a loss (whether real or not is not the point, we FEEL like something has been taken from us). This causes us to make recouping the loss (getting revenge) to be the primary motivator. This is what leads "chasing behavior" (poker players call it "going on tilt"). It is the surest and quickest way to blow up your account.
Here is a real life tale of anger, revenge and bad trading from my life. Years ago during the tech bubble, someone I cared a lot about lost a sizable sum of money in a "hot" stock - "cough" JDS Uniphase "cough"- it caused him pain. I remember feeling this stock "owed" us something. So I decided to go in and take something back from it to even the score. Long story short: JDSU - 2, Frank - 0).
To quote the Buddha, "We are not punished for our anger. We are punished by our anger
And, hey, let's be careful out there.
Frank Murtha, Ph.D.
* MarketPsych Legal Department Disclaimer: In no way should the contents of this blog be construed as a recommendation to inflict bodily harm on one's self. Headbutting your wall can result in injury as well as expensive-to-repair tile damage. Cast iron cookware is heavy and will cause significant damage to metatarsal and phalangeal bones of the foot if dropped from a sufficient height. MarketPsych is not responsible for any self-inflicted damage that comes from your inability to recognize hyperbole.comments powered by Disqus