Some time ago I spent 4 days in a Forex trading office, teaching and working with the traders there. It was interesting to see how these traders speak with one another, and to listen to what they say. I couldn’t help making some observations which I will now share with you.
If you are a part- or full-time trader, you may have enjoyed the attention this wild and wooly occupation brings at social gatherings and events. Many are interested in trading, and find you interesting as a successful trader. At first, the attention may be enjoyable; but a need to maintain this reputation may impact your trading attitude and mindset, and therefore, your bottom line.
The best strategy you can use to avoid letting your reputation influence your performance—especially when enduring a drawdown period—is to keep your conversation low-key about your trading career. Why? The more you present yourself socially as a "successful trader," the more psychological effort you will spend defending this reputation. Several research studies have documented that one of the biggest obstacles to sound decision-making is the need to save face in social situations. People are so reluctant to face the adverse social consequences of having made a poor decision that they stay on a losing course of action, rather than admit they were wrong. For example, some traders are reluctant to sell off losers in order to avoid the possible social criticism that acknowledging a failure may bring.
Suppose you have told your friends about a large position, and within minutes, hours, or days, it tanked, hard and fast. Most folks can’t wait for the next opportunity to ask you (even though they probably know the answer) how your “hot trade” is doing. If you got rid of it, at least you have the solace of managing the trade properly—even though you must tolerate a volley of smug “you-thought-it-would-go up and such, but-it crashed-instead” comments. On the occasions when you ignored your protective stop, however, and held onto the bad trade, the “Boy, you-really-ARE-dumb” looks (and perhaps comments) can exacerbate the psychological devastation you've by now, surely, inflicted on yourself. And we all know the negative impact a negative attitude can have on our trading.
As another example, how many times has the market gapped up, then chopped through the rest of the day, handing you more losses than wins? Inevitably, those are the days when well-meaning friends call on the phone. “You must have made a fortune today!” they gush. “Not really,” you mumble with a sinking heart, remembering the frustrating trading environment. After you hang up the phone, the subsequent feelings can lead you to believe you must have been a dope that day; surely every trader in the world except you grabbed huge gains. In social environments, once you announce and identify yourself as a trader, you will feel a need to defend your reputation. Trading is hard enough, why introduce additional social and psychological pressures that will adversely influence your trading results? Keep the specifics of your trading career to yourself. There is no sound reason to discuss the specifics of your career socially. It’s often done just to build up your ego, and enjoy the attention of others. You'll pay a price for this short-term gratification in the long run. Avoid specific observations or trading choices. That way, you'll avoid embarrassing questions and comments that will interfere with your trading.