Every trader has felt it – that sting in your gut after closing a trade too early or holding on too long.
Regret is a natural part of trading, but if left unchecked it can derail your performance.
Let’s explore what regret looks like in real-world trading, what’s happening in your brain when you feel it, and how deeper psychological factors may be at play.
In Part 2 that’ll come out next week, I’ll discuss practical strategies to manage and reduce regret so you can keep your mental edge in the markets.
Understanding Regret in Trading Behavior
Regret in trading comes in many forms. Perhaps you sold a winning position too soon, only to watch it continue climbing without you. Maybe you held a losing trade far past your stop loss, then felt a wave of remorse as the loss deepened. Or you sat on the sidelines for a move you knew you should have taken, and now you’re kicking yourself.
In real-world trading, regret often shows up as that voice in your head saying “I should have done X instead.” It’s the coulda, woulda, shoulda of the trading world, and it haunts new and experienced traders alike.
This emotion isn’t just unpleasant – it actively influences behavior.
A trader consumed by regret might start chasing the market to make up for a missed opportunity, or revenge trading to earn back a loss.
For example, if you close a trade and then see it rocket higher, regret can tempt you to jump back in impulsively at a worse price. On the other hand, regret can also cause paralysis.
After a painful mistake, you might become so afraid of feeling regret again that you hesitate on the next setup or avoid trading altogether.
In short, regret can push traders into overreacting (frantic buying or selling out of emotion) or underreacting (withdrawing and second-guessing every move). Both extremes are detrimental to performance.
It’s important to recognize that regret is virtually inevitable in trading. No one can perfectly time every entry and exit. The market moves in unpredictable ways, so there will always be “if only” moments.
High-performance traders are not defined by never feeling regret. They’re defined by how quickly and constructively they respond to it.
The goal is not to eliminate regret (an impossible task), but to keep it from hijacking your decision-making going forward.
The Neuroscience of Regret: What’s Happening in Your Brain
Why does a regretted trade feel so bad? Neuroscience offers some insight.
When you experience regret, your brain is effectively comparing the outcome you got with the one you wished you had.
This activates the brain’s reward circuitry in a peculiar way – essentially flagging an error in your outcome. Studies using brain scans show that feelings of regret light up regions like the medial orbitofrontal cortex, an area behind your forehead that’s involved in evaluating outcomes and imagining “what could have been.”
In fact, this region is so key to processing regret that people with damage to it have trouble feeling or learning from regret at all. Under normal circumstances, the brain uses regret as a teaching signal: “That hurt – let’s not do that again.”
It’s a bit like an internal coach, pointing out a mistake so you can adjust your strategy.
However, in the heat of trading, this system can work against us.
The emotional intensity of regret can flood the brain with stress hormones and emotional arousal that clouds rational thinking.
The same neural circuits that register physical pain are activated, which is why a bad trade can literally feel painful.
Your brain doesn’t neatly separate financial loss from other kinds of loss – it all triggers a threat response.
When regret kicks in, you might notice your heart pounding or your face flushing; that’s your limbic system (the emotional center of the brain) firing up a fight-or-flight reaction.
In moderation, this can be useful. A bit of sting from a mistake can improve learning.
But trading requires quick, rational decisions, and an overwhelmed brain can lead to erratic choices.
Essentially, when you’re deep in regret, your brain is overcorrecting: it’s either slamming on the brakes or stomping on the gas, rather than allowing a measured response.
Psychoanalytic Insights: Regret and Your Inner Psychology
From a deeper psychological perspective, regret isn’t just about the money or the trade. It often taps into an internal narrative you have about yourself.
As a mental performance coach, I’ve seen that for many high-achieving traders, a trading mistake can trigger core beliefs about self-worth and competence.
An example is the internal dialogue, “I screwed up that trade, so maybe I’m not cut out for this,” or “I missed that big win – I always miss great opportunities.”
This is where internal conflict comes into play. Part of you knows that one trade doesn’t define your career, yet another part feels as if this mistake confirms a personal flaw. It’s almost as if two “selves” are battling: the rational self versus the harsh inner critic.
That inner critic is a major player in regret.
In psychoanalytic terms, you might think of it as an internalized voice of authority or judgment (for example, an echo of a parent or teacher who expected a lot from you).
When you make a trading error, that critic pounces: “How could you be so stupid? You knew better!” This dramatically amplifies the regret, turning a normal emotional response into a spiral of shame and self-blame. If you tie your self-worth to your trading success, this effect is even stronger.
A loss isn’t just a financial setback – it becomes a verdict on your abilities or your worth as a trader. That’s why a small mistake can sometimes send a normally confident trader into an emotional tailspin; it’s not the trade itself, but what they perceive it means about them.
Unconscious patterns can also drive how we experience and respond to regret. We all carry certain beliefs and scripts formed over years, often outside of our awareness. For example, if someone deep down believes “I always mess things up in the end,” they might unconsciously behave in ways that fulfill that prophecy, like exiting winners prematurely or taking on catastrophic risks, thus ensuring they have something to regret. It’s a strange paradox: a trader might recreate scenarios of regret because it fits an unconscious self-image or emotional comfort zone.
Psychoanalysis suggests that people sometimes repeat painful patterns (called repetition compulsion) in an attempt to gain control over them or because it’s what feels familiar at a deep level.
In trading, this could mean consistently deviating from your strategy in the same way and ending up with the same regret, over and over. Until you recognize the pattern, it’s hard to break.
The key insight here is that your reaction to a regrettable trade may be magnified by these underlying factors. By doing some introspection (or working with a coach or therapist), you can identify if there’s a deeper emotional trigger involved. Are you really upset about this trade, or is it poking at an old wound (like fear of failure or need for approval)?
Often, just becoming aware of this connection can loosen regret’s grip. You realize, “Ah, I’m not just mad about losing \$1,000 – I’m also feeling like I let myself down like I did years ago in that other situation.”
Separating the past from the present helps you respond to the current situation more objectively. In short, understanding the unconscious side of regret can free you from self-sabotaging cycles and overly harsh self-judgment, allowing you to approach trading mistakes as opportunities to improve rather than proof of personal failure.
Stay tuned for part 2 where I’ll discuss strategies to reduce and manage regret as a trader.
