“We must learn to live together as brothers or perish together as fools” – Martin Luther King. Jr
An important aspect of trading emotionally is valuing integrity and morality. An emotional trader must, above all else, think of the repercussions their investments may have on the world at large. Could you really sleep at night knowing that you are personally funding terrorists or child exploitation?
The answer is no.
The impact buying or selling shares has on other people is often conveniently overlooked. Mainstream investors, teachers, and self-proclaimed gurus choose to ignore the broader implications of these interpersonal interactions out of moral convenience. To them, that which is not seen, can do no harm. This culture of permissiveness is in violation of human dignity. Every trade that is made, every contract that is processed, is a personal transaction, that of which dates back to Babylonian times. The biggest implication of the result of this shift in perspective surrounds the idea of bag holding.
Outside of the world of fiance, bag holding refers to a form of common courtesy. That is, if you were to perhaps see an elderly woman holding many bags of shopping, one might partake in bag holding such that said elderly woman was disencumbered.
In the realm of investing, this socially positive term has been twisted to refer to traders who refuse to sell shares cheaply. This term is often employed by market manipulators as well as losers who sold and are looking for reaffirmation that they are not alone in their losses.
An interpersonal perspective helps an outsider understand what the emotional investor is doing, and sheds light on the concept of bag holding. Once again, human behavior imitates life. Kind-hearted individuals hold the metaphysical bags of those who cannot afford to (the “old women” in this metaphor). That is, those who are strong, have more wealth available to trade, take on the burden of those who cannot, the old women.
Indeed a cold, heartless view of markets and investing may lead some to believe that it is okay to let old women struggle and fail whilst attempting to cross the street carrying groceries. However, experienced investors will attest to the moral duty we as humans must carry in the advancement, not only of ourselves, but of the weakest among us.
Life changing realizations of this nature have powerful impacts on our lives.
A young protege, after a long day of trading, once called into the office late at night and asked if it was okay to cry. Back then, even the best among us at the firm were indoctrinated into the blissful haze from which you, dear reader, shall, with great hope, awaken. As such, not a soul (or suit) took the young intern seriously. For who would be taken seriously, who could withstand the turmoil of the politically correct financial world if their character was so weak, so penetrable, so naive.
Looking back, these were dark times. Things should have ended very differently. It wasn’t soon after the hitherto unnamed protege’s death that the stock market of 1987 would soon cost us all our jobs, financial security, and the social standing we once flaunted. Many traders learned a terrible lesson soon after, everybody cries.
As a coping mechanism, crying is the most efficient method of displaying sadness and sorrow. Sobs are a universal sign of distress, discontent, and loss. As such, tears may be seen as a commodity. Although an emotional investor will, at all times, avoid selling, and above all else, avoid being a loser, there are particular situations where there simply may not be a lesson to exchange for the sale of your position. That is to say, there may be nothing to learn.
In these instances, an intelligent well-trained emotional investor will fall back to basic principles of loss aversion and exchange their losses for their value equivalent in tears. In fact, tears may be the most valuable commodity of all. Only losers sell. Serious investors learn. Serious investors cry.