Brainlock

Earlier this week, I was reading about what psychologists call 'brainlock. It's that stunned and bewildered state that the majority of people find themselves in when confronted with a sudden crisis.

Apparently people essentially divide into three categories, in a 10-80-10 ratio. Around 10%of us handle a crisis in a relatively calm and rational state of mind. Another 10% of us freak out and lose it completely, whereas the great majority find that reasoning is significantly impaired and that thinking is difficult, and as a result we turn into statues.

I'm sure anyone who has done a significant amount of in-play trading has been confronted with a sudden turn of fortune, either for the better or, more likely perhaps, for the worse.

I have certainly had disasters where I have found myself doing a reasonable impression of a statue, but as the article said, that's OK. The response is not necessarily fatal, and doesn't last forever. The key is to recover quickly from the brainlock, shake off the shock, and figure out the best way forward.

And what is the best way forward? I would offer the following. Relax. Stay calm. Don't lose perspective. Sometimes things aren't as bad (or as good) as they seem. Stay focused. Don't give up on a bad situation. If you're looking at a four figure loss, and you can trim the loss to three figures, that's as good as a win.

After five years of trading, my statue moments are fewer. I have a different perspective on a potentially bad situation than I had a few years ago, and one good thing about disasters is learning from them so that next time, one is better prepared to deal with them.

"It is the greatest of all mistakes to do nothing because you can only do so little" - Sydney Smith.