Missed potential profit doesn't really count as a loss, so I wouldn't worry about it too much.
This is incorrect. There was no 'potential' profit, there was actual profit that was lost afterwards. Yes, that is a loss. Just like it was a gain before.
I find it psychologically a lot easier not to look at it like that. I believe if you start thinking that way, you get emotional and are more prone to mistakes.
Plus, I live happier if I look at it like 'play money' and 'lost the moment you start speculating with it'.
Hi Spaceman,
I admire your honesty and ability to look inwards. I sympathise with your desire to feel good about your investments and I understand that not recognizing a drop as a loss makes you feel not so bad. I can also understand that you have good reason to bend reality if you otherwise would panic sell.
However, I think you are taking a dangerous shortcut because bending of reality (or said less nicely 'fooling yourself') can lead to much worse disasters than say panic selling. Denying what you have at risk with untrue statements that it is 'just play money' while it is actually an important part of your capital, or denying that you lost when it went down, can lead to ruin.
Facing the truth of a loss, although painful, is the only way to improve your investment decisions, as it is exactly that pain that one needs in order to be motivated to change. That's why I think recognizing a loss is important in order to become a better investor, while indeed also setting up an investment plan/strategy so that you are less prone to panic selling.
Sorry for the lecture
I don't think I agree with you. In general (for most aspects of life) I agree that people deluding themselves or telling "white lies" to others to make them less sad/more optimistic etc. has a net negative effect, because it screws up the facts, and you need the facts in your decision-making processes to figure out the optimal solution.
However, I believe in trading it is well-known that people tend to be overemotional, and are often incapable of making rational decisions even if something is screaming "overbought" or "oversold" in their face. Denying our emotional nature is self-delusion too.
Furthermore, I seem to get the impression that you think that my decision to look at it as "play money" will make me be riskier with my capital. I don't think that is necessarily the case, because you also dampen the greedy emotions that lead to overinvestment in an overpriced asset. At least, if you can do it right. I won't deny that I still thought/think about one day buying a house with BTC profits, or felt somewhat flustered/angry when the bubble collapsed that I didn't take more profit. But I try minimize those thoughts when they occur.
Finally, I also believe that you can learn from your mistakes even without being (too) emotionally involved, perhaps even more so. If I play a board game or a computer game, I strongly want to get better at it, regardless of the fact that there is no money involved. But maybe that is because of my competitive nature when it comes to games, maybe I am just more emotionally involved to get started. Could be that there is no right universal answer, and everybody needs to adapt based on their own character
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