A powerful insight from the real Jesse Livermore:
"Losing money is the least of my troubles. A loss never troubles me after I take it. I forget it overnight... But being wrongβnot taking the lossβthat is what does the damage to the pocket book and to the soul.β
THREAD: πππ
"Losing money is the least of my troubles. A loss never troubles me after I take it. I forget it overnight... But being wrongβnot taking the lossβthat is what does the damage to the pocket book and to the soul.β
THREAD: πππ
Why does taking a loss lead to eventual peace of mind? Why does continuing in a loss lead to continued anxiety? The answer lies in the respective impacts on ATTENTION.
Here's the insight:
What you experience in life--whether pleasant or painful--is a function of where your ATTENTION goes, where it gets placed.
However, you don't necessarily get to decide that. Often, your circumstances, the situation you're in, will decide it.
What you experience in life--whether pleasant or painful--is a function of where your ATTENTION goes, where it gets placed.
However, you don't necessarily get to decide that. Often, your circumstances, the situation you're in, will decide it.
When you remain in a losing trade, you are remaining in a situation where you HAVE to pay attention to it--to the losses it has created, is creating, & might continue to create for you. Your attention will be stuck on a sore spot that evokes anxiety, frustration, regret, etc.
You might think, "Well I'll just shift my attention onto something else." Worth a try, but it often won't work. Your mind isn't stupid. It exists to protect. If there's an ongoing threat, it's going to focus on that, cycle back to that, etc. Regardless of how it makes you feel.
But... after you take the loss, you leave the situation. Your mind is free to let go of it, forget about it, move on.
Whether you lose $1K, $10K, $100K, $1MM, $10MM, the loss can be forgotten much easier than you might think, ONCE the situation gets fixed and the damage stops.
There's no adaptive value to fixating on a situation that's over. If the stimulus to thinking about it is gone, & if there's no longer any action to mull or decision to make, your mind will move on. That's how it's designed. It's what healing IS, wrt ANY psychological difficulty.
Note that this point isn't specific to any market direction. Rather, it's specific to being WRONG. If you stay on the WRONG side, whatever side that is, you will continue to experience negative emotions.
But if you get on the RIGHT side, you will begin to heal, forget, move on. REGARDLESS of how much you lost in the process of getting there.
The insight that the quality of your experiences are a function of how your attention is allocated is attributable to the British behavioral psychologist Paul Dolan. It's a powerful insight that has implications for almost any topic one can think of.
It's the reason why set-it-and-forget-it approaches to investing (e.g. 60/40 indexing w/ rebalancing) can be helpful to peace of mind. If you can get locked into an approach like that, where you no longer feel a need or responsibility to pay attention to what's happening...
...then you won't have to continually allocate your attention to an uncertain, unforgiving decision process that tends to preferentially induce anxiety, regret, and so on. You're free to allocate it to destinations that naturally evoke better experiences.
@flowfocus @thefiniteidea Happens to many people in old age. You deteriorate, aren't what you want to be or used to be. In his case, that was a trigger occurring alongside other factors in the context of a propensity towards severe clinical depression, which tends to get worse w/ age.
@Freakotrader And not everyone can do that comfortably, which is why being able to do so can be a blessing.
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