I’m writing a piece for a client on the psychology of day trading, and I’m thinking about a recent conversation I had with a fellow freelancer about bad projects we had worked on. We both noted that we knew we were taking on projects that would turn into disasters, and yet we signed on anyway. Why?
“I’m greedy, I admit it,” my friend said, with a laugh.
I agreed at first, but as I thought about it, that wasn’t the case at all. It was fear, not greed, that led me to take on a nightmare assignment although the Nebraska Cornhuskers Marching Band could have been waving red flags in my face, it was so clear that the project was doomed.
Traders hear it over and over again. Four emotions have the power to destroy you: doubt and its twin, overconfidence; and fear and its twin, greed. We are susceptible to all of these at one time or another, and usually, there’s one that’s our guaranteed downfall. None is worse than the other, either. They are all bad.
In my case, I’ve screwed up enough that more time won’t kill me, so neither doubt nor overconfidence are big issues. I like to think I have a good sense of my financial priorities and am reasonably generous to different charities, so I don’t think greed brings be down. But fear? Oh, good heavens, yes. I’m always sure that every client is my last, that my health insurance will be rejected, that some horrible twist of fate will have me living under a railroad underpass.
Half the battle is identifying the issue. If you trade or freelance, think long and hard about what your weakness is and what it causes you to do. Then, you can think about how to overcome it. For me, it’s been a combination of managing my expenses and building up savings so that it will be easier for me to walk away the next time the red flags start waving.
If your issue is doubt, consider keeping a list of all the great things you’ve done and finding projects that you know you can do to build a track record. If it is overconfidence, try learning something completely new – a little failure where the stakes are low can keep you on track. If greed is your thing, consider finding a non-profit that matters to you and support it with your time or money.
(If you don’t think you have an issue, consider overconfidence.)
I’m not oversharing here, because we all have a basic emotional weakness or two. That’s human nature. A little work on the weakness can make you far more effective. At least, that’s what I’m hoping.