Tuesday, 3 December 2024

Success breeds success, and failure breeds failure, but too much success breed failure too

Day trading stock markets teaches you a lot. Whether it is random I've not decided yet, but the brain does not see it like this.

In particular we are not made of money, and not having money is a worry. So when you risk money in a stock there is concern that you may lose it. There is a secondary factor, which is why people do it, that we  may gain money.

When a stock price moves against our bet we go into some level of stress. When it moves with our bet, as expected, then we go into a state of some validation and excitement.

Now the impact on our psychology is important. A series of failures does not just cause us to lose money, it also puts us into a negative state of mind. One feature of this is we start to "need" to win to prove that we are not a failure our self, to prove that the feeling of negative is not fixed, but we can shake it off by winning. But this way of think now means we are no longer better freely. We are in fact more likely to over bet and take on more risk in a hope of getting lucky and shaking off the unwelcome feelings and beliefs. This way failure breeds failure.

Conversely when things are going well we have a belief that we will win and we are more resilient to loss and so can survive better until the stock comes back into our favour. This way success breeds success.

But we can also get greedy and end up hustling our self. If we believe we have become lucky, like the negative state of mind above, we can start to take unrealistic risks. In this way success can breed failure.

These patterns can occur on many scales. Some people's whole lives are affected by a failure or success mindset. And we often see the most successful end up in failure after  taking too many risks with their bodies and lives.

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