A certain uncle's massive crash—The market isn't that forgiving—

Last year, as mid-year approached, the market rose on expectations of a US rate hike, and the Nikkei Stock Average stayed in the 20,000 range.

Speaking of the market back then

  The USD/JPY reached 135 yen!

and there were economists suggesting a quite strong dollar, and the Nikkei Stock Average

too,

The Old Man’s Fate

At the height of such a bull market, about a year ago, I was sitting on a park bench with my five-month-old baby in my arms, just zoning out as usual.

When you hold a small baby, strangers“Oh, how cute!”would often come up and talk to me.

My head was always filled with market analysis and other fantasies, but in reality I’m quite socially awkward, so“Ah, thank you very much….”is about all I could manage in conversation.

And on that day, a strange man approached me with a beaming smile.

“Baby’s so cute! Hey, listen to this. I recently made two million in stocks. Look, I just withdrew it.”

He showed off a stack of cash to me, who was meeting him for the first time.

Of course, that man probably didn’t know that I was a full-time trader.

I replied, “Wow, amazing!”

The man’s grin widened as if it had been fueled by his own excitement.

“Well, it was just a fluke! I’ve just started too, you know. Stocks are easy money, it’s amazing! Well then!”

With those words he left, leaving me behind.

And a few months laterthe China Shock— a crash market that shook global markets —

I wondered if that man would be alright. It briefly flashed through my mind.

Even after that, the recovery of the Nikkei Stock Average was scant, and with still little experience

“Well, it’ll rise again someday! Long live Abenomics!”

I think many people carried substantial losses because they couldn’t bring themselves to cut losses, thinking lightly that it would go up again someday.

The market isn’t that forgiving

Among those inexperienced or just starting in trading

“FX is all about whether it goes up or down, so if you leave it alone, won’t you eventually make a profit?”

Some people hold that view. Those who enter with such a naive belief will eventually realize it the hard way if they continue“The market isn’t that forgiving””that’s the point, I suppose.

How many times have I lost and learned that lesson myself?

Just like that smiling old man, there is indeed a possibility that an "accidental" rise or fall could bring in a windfall.

However, the unchanging rule then and now is that “the market isn’t that forgiving.” If you underestimate the market, you will surely suffer eventually.

As I wrote in the previous column, when trading you inevitably cling to “profit.”

Because it’s human greed, there’s no helping it.

But if you want to remain a trader, I believe you should feel joy more in the profits that come from careful analysis and trading exactly as planned — even if they are small pips and small gains.

Keep this in mind, and you won’t become as pessimistic about

• “missing out”
• “cutting losses”
• “taking profits too early”

as much.

Becauseall of those outcomes are the result of prior analysis and following one’s own plan, and regardless of the result, they are not wrong actions for a trader.