Money Expert: Why Your Emotions Are Losing You Money

📅 23.12.2025 👤 Syed Maaz Ashgar

Introduction

With over three decades in global markets, Racha Al Khawaja has seen every cycle of fear, greed, innovation, and collapse. From screaming trading floors in 1990s London to today's hyper-accelerated, social-media-driven markets, she has traded fixed income, FX, derivatives, and equities at institutions like Lehman Brothers and State Street.

Now Managing Partner at Gate Capital, Al Khawaja believes the biggest edge for retail investors isn't a new strategy or asset class, but financial literacy, discipline, and emotional control. In this interview, she explains the real difference between trading and investing, why most beginners lose money, how fear and greed distort decisions, and why small capital is never the real barrier.

From 1990s Trading Floors to Today's Markets

Host: Racha, you have 30 years in markets and investment banking. How did you start, and what do you do today?

Racha Al Khawaja: I have been in investment banking for about 30 years. I started as a repo trader at PaineWebber in London on the trading floor, then moved to Lehman Brothers trading fixed income swaps on Russia and Turkey. Later, I joined State Street on the FX floor, which was a very large and active FX operation because they are the largest custodian in the world.

Host: Was the trading floor really like the movies?

Racha Al Khawaja: In the 90s it was exactly like the movies: paper trails, screaming, shouting, very male-dominated and not politically correct at all. It was extremely high stress but also incredibly fun and energetic, almost like a small economy with food trolleys and shoe-shine people coming onto the floor.

Host: How did your career evolve from there?

Racha Al Khawaja: After about five or six years of trading floor work, I was burnt out from the hours — on the floor at 6 a.m. and leaving sometimes at 10 or 11 p.m. — so I moved into electronic trading. I was there at the onset of Tradebook, Bloomberg's electronic trading platform, and ran the hedge fund book for around eight years. Over time I shifted into asset management and now private equity at Gate Capital, where we focus on private equity and M&A transactions and investment banking advisory in the region.

Host: Do you still trade personally?

Racha Al Khawaja: Yes. Once a trader, always a trader. It stays in your blood, and it gives you a deep understanding of why things are happening in the world because markets move every sector in any industry.

Trading vs Investing: Science, Art and Time Horizons

Host: Let's start with the basic question a retail investor might ask: why should I trade?

Racha Al Khawaja: Trading is not easy and it is definitely not "easy money." No one should jump into trading without spending time learning, watching and understanding market behaviour, psychology, timing and data analysis. You need to understand your own risk appetite, decide whether you are suited to faster or slower pace products, and be clear whether you are trading or investing because they are not the same thing.

Host: So, trading and investing are not the same?

Racha Al Khawaja: They are definitely not the same. People often see trading as short-term — daily or weekly activity — and investing as long-term, but in reality you need to look at both the science and the art. The science is data analysis: equities, fixed income, derivatives, commodities, and tools like moving averages or Fibonacci and newer methods. The art is the emotional side: market psychology, momentum, macro events and your personal emotions.

Host: When does trading become gambling?

Racha Al Khawaja: It becomes gambling when decisions are driven mainly by emotion — "I like this," "everyone is buying this," "I heard it's going well" — without a studied analytical framework. If you are only following feelings and FOMO, you are punting, not trading.

Host: How does investing differ in practice?

Racha Al Khawaja: A key difference is the compounding effect of investing. The longer you stay invested, the more compounding works in your favour. You can be a long-term active investor, building positions in names you have strong conviction in, adding over time, taking partial profits to protect capital and using macro and cycle analysis, as opposed to purely passive investing where you just put money in and leave it.

Patience, Discipline and “The Markets Punish Ego”

Host: You mentioned risk appetite and emotions. What does someone need internally to be successful in markets?

Racha Al Khawaja: The most important traits are patience and discipline. Patience is crucial but very hard to teach: it is incredibly difficult to be patient while losing money or when the world feels like it's crumbling. Discipline means setting parameters — how much you are willing to risk, where your exits and stop losses are — and sticking to them even when emotions run high.

Host: How do greed and fear show up in trading?

Racha Al Khawaja: Greed often builds slowly on the way up because gains usually come like an escalator, and then losses hit like an elevator. You start thinking "nothing can stop this," and that is exactly when the market humbles you. Fear works the opposite way: it misguides your analytical skills, creates panic and pushes you to make emotional decisions that again turn trading into gambling.

Host: You mentioned a line that really stands out: "markets punish ego." What does that mean?

Racha Al Khawaja: On the trading floor, the number one rule they teach you is that markets punish ego, not mistakes. People who fall hardest usually do so out of ego and greed — believing they can no longer be wrong, taking oversized risks and then facing losses bigger than they can stomach. That is why sticking tightly to discipline is non-negotiable.

Host: How do you personally manage your emotions when markets are volatile?

Racha Al Khawaja: There are days when I simply avoid looking at the screen because I know it will ignite emotions I am trying to keep at bay. If I have already decided I am not going to act, I disengage: I watch Netflix, I cook, I do something unrelated. It is a deliberate way to prevent fear or FOMO from hijacking my decisions.

Noise, FOMO and Building a System

Host: Retail investors are bombarded with strategies, indicators and social media hype. How should they deal with all this noise?

Racha Al Khawaja: There is a huge amount of noise in the market, and social media multiplies it. One reel about a crash or a rally quickly becomes thousands because algorithms feed you more of what you watched. Most of that has nothing to do with your own strategy or conviction but strongly triggers your emotions. The ability to eliminate noise and stay on your path — while still being flexible enough to adapt to macro changes — is a critical skill.

Host: Many people jump from strategy to strategy. How should someone approach building a trading system?

Racha Al Khawaja: You need a clear framework: a thesis, defined tools, risk parameters and a time horizon. Then you must stick with it long enough to get meaningful feedback, rather than changing course every time you see a new video. At the same time, you must be willing to adapt within parameters when interest rate regimes, geopolitical conditions or liquidity environments change.

Risk Appetite and Portfolio Structure

Host: How can a retail investor figure out their risk appetite?

Racha Al Khawaja: Start from your overall financial situation: your income stability, existing investments in real estate, your business, private equity or long-term assets, and your obligations such as mortgages, tuition or planned retirement. Then decide what portion of your overall portfolio you are truly willing to risk in markets — 5%, 10%, 50% — and within that, how much will be in more volatile versus less volatile assets and how much remains in cash as a buffer. A cash buffer is essential because opportunities always arise, sometimes when least expected.

Host: How does age affect risk appetite?

Racha Al Khawaja: When you are younger, you generally can afford more risk because you have more years ahead to earn and recover. In your 60s or 70s, heading into or in retirement, you cannot risk your entire pot because your earning capacity is lower. So risk appetite is dynamic; it must be reviewed as your life circumstances change.

Active vs Passive and Dollar-Cost Averaging

Host: You distinguished active from passive investing. Can you explain active long-term investing in more detail?

Racha Al Khawaja: Active long-term investing means you select specific products — bonds, equities, sectors — based on analysis and conviction, and then manage timing and size. You may build positions gradually, take partial profits to protect your initial capital — so that in an "Armageddon" scenario you are at least back to your starting point and not significantly below — and then add again on subsequent cycles. It is long-term, but you are actively managing entry, exit and size.

Host: How does this differ from strategies like dollar-cost averaging?

Racha Al Khawaja: Dollar-cost averaging — adding more as prices go against you to lower your average — can be useful but is conceptually different. Often people say "I'm up 10%, I'll take 5% out and reinvest later" without a clear basis. If those decisions are not anchored in pre-defined metrics — profit targets, risk limits, capital vs gains — you are acting emotionally and arbitrarily rather than following a disciplined active strategy.

Derivatives, Leverage and Why Losses Are the Elevator Down

Host: Many retail traders are drawn to derivatives and leverage because they can "play both sides" of the market. What is your view?

Racha Al Khawaja: Derivatives are inherently leveraged instruments because the exposure behind an option or future is often equivalent to holding a much larger position in the underlying. They were originally designed as hedging tools, but in deep and liquid markets in the US and Europe they have become trading instruments in their own right. For most retail investors, the risk is that leverage accelerates everything: it accelerates profits, but it accelerates losses much more painfully.

Host: How should a retail investor think about when to use leverage?

Racha Al Khawaja: You should calculate explicitly what happens if the market moves against you, say 10% in a week, at your chosen leverage. If that loss number is terrifying, reduce or avoid leverage. A sensible approach is to introduce leverage only once you have built a healthy buffer of profits through slower, unlevered compounding. Even then, add leverage gradually and always with clear downside scenarios in mind.

Host: Are sophisticated options strategies realistic for most retail traders?

Racha Al Khawaja: Advanced option strategies like butterflies and arbitrage structures require multiple screens, spreadsheets and nearly constant attention. They can make sense on a professional trading floor, but for most retail investors, using derivatives simply as leveraged bets — without viewing them as hedging tools or fully understanding the risk — is extremely dangerous.

Turning Market Lessons into Everyday Financial Literacy

Host: How does understanding markets improve everyday financial decisions beyond trading?

Racha Al Khawaja: Even if you never trade, understanding markets and their psychology teaches you to time major financial decisions better. For example, when buying property abroad, you should consider FX levels: where is the euro trading, is the recent move big enough to skew your return, what are the tax implications, and is this investment for use or yield? The same applies to business loans: you need to understand interest rate cycles, product structures and what criteria you are comfortable with. This is all financial literacy.

Host: You emphasize financial literacy as a foundation. What does financial literacy mean to you?

Racha Al Khawaja: Financial literacy is the ability to understand and manage your numbers — income, spending, debt, investments, risk and timing — so you can make informed decisions about housing, business, education, healthcare and more. It is not just theory, it is practical: understanding mortgages, cash flows, loan terms, investment risk and return, and how macro conditions affect all of these.

Host: Where should financial literacy start?

Racha Al Khawaja: It must start at home. Schools usually teach theory and, particularly for girls, still push more towards humanities and arts than financial subjects. At home, parents can explain real decisions — buying or selling a house or car, renewing a loan, making an investment — so children see the reasoning and the consequences. Even if they don't fully grasp it at the time, it often clicks a decade later.

How to Become Financially Literate in Practice

Host: For someone who feels "I'm not financially literate," what practical steps would you recommend?

Racha Al Khawaja: First, talk about money openly instead of treating it as taboo. Ask questions, speak to people you respect who are "in the know," and don't limit yourself to one or two opinions — talk to five or ten and then form your own view. Second, use modern platforms that provide research, articles and analysis — even if you only invest passively in ETFs, you can read widely across different perspectives. Third, regularly review your own numbers: income, expenses, debts, and investments.

Host: You mentioned reviewing your own performance. How do you do that?

Racha Al Khawaja: I still write things down. I document what I planned to do and then go back every quarter to see what I actually did: what I bought or sold, whether I stuck to my parameters, whether I am up or down, and what I did right or wrong. Emotions have no memory, so revisiting the record helps you learn objectively from both wins and losses.

Host: How important is it to ask for help when making big financial decisions?

Racha Al Khawaja: It is extremely important. I'll give you an example: I once sold a property in Europe at a loss in euro terms but waited patiently as the euro moved up towards parity with sterling, my original currency. As noise in the market suggested it would go well beyond parity, I called a former trading colleague for his view. He told me bluntly, "you've forgotten your lessons — this is greed," and advised me to get out. I followed that advice, locked in a decent outcome, and the euro did not move much beyond parity and later tumbled. Without that external perspective, I might have stayed in purely out of greed.

Losses, Hindsight and Learning by Playing the Game

Host: Many retail investors fear losing money so much that they never start. How should they think about losses?

Racha Al Khawaja: Losses are inevitable; they are part of the process and a powerful teacher of humility. A financial loss creates emotions you never forget, and that experience teaches you to manage size, risk and emotions better next time. The key is to ensure that losses are survivable — small enough relative to your overall finances that they become lessons, not life-changing disasters.

Host: What about hindsight — regretting past decisions because an asset later went higher?

Racha Al Khawaja: Hindsight is a killer. "I should have, I could have, I knew and I didn't" makes people miserable and blinds them to the progress and gains they have actually made. It also tempts them to take inappropriate risks in the future to "make up" for perceived missed opportunities. The discipline is to evaluate decisions based on what was known then, not what is known now.

Host: Can someone become a good trader or investor just by studying and not actually investing?

Racha Al Khawaja: No. If you only study but never invest, you are a spectator, not a player. To truly learn, you must be in the game with real money, even if the amounts are small. That is when emotions appear, and that is when you learn how you actually behave under stress, not how you think you will behave.

Money Mindset, Spending and the Biggest Misconception

Host: You said financial literacy is also about our relationship with money. What is the biggest misconception you see?

Racha Al Khawaja: The biggest misconception is that a high income automatically means more wealth. In reality, how you spend is more important than how you earn. I have seen people earning seven or eight figures end up in debt because they were never taught how to spend and manage their lifestyle. If you earn a million and spend three million, you will have problems; if you earn a million and spend one hundred thousand, call me in five years.

Host: How do lifestyle choices affect long-term wealth building?

Racha Al Khawaja: When income rises, many people immediately raise their lifestyle — their "buffer" disappears. To build wealth, the gap between what you earn and what you spend must widen over time, not shrink. That surplus is what funds savings, investing and compounding.

Host: You also questioned the phrase "money doesn't buy happiness." Why?

Racha Al Khawaja: To me, saying "money doesn't buy happiness" is shallow and unhelpful. Money is a necessity: you need it to live, to educate your children, to access healthcare, to support others, to give to charity. The real issue is not whether it buys happiness but whether you know how to handle it. Avoiding talking about money, which older generations often did culturally, is a disaster in the making because it leaves people unprepared for real-life financial decisions.

Practical Habits for Retail Investors

Host: For a retail investor listening today, what practical habits should they build around money and markets?

Racha Al Khawaja: Track your spending regularly and understand where your money actually goes rather than only focusing on increasing income, and maintain a cash buffer so you can survive shocks and seize opportunities. Review major financial products like mortgages every few years; new products may save you meaningful amounts over time, and read widely — including opinions you disagree with — to understand the full market narrative. Write down your investment decisions and revisit them each quarter to learn from both mistakes and successes.

Host: Do you have a favourite saying about money from your trading days?

Racha Al Khawaja: Yes. On the trading floor we were told, "Money is your mistress. If you don't look after her every day, she's going elsewhere." If you neglect your money, it really does go elsewhere.

Beyond Finance: The Human Side

Host: Our show is called "Not Just Money," so one final non-finance question: what is one skill you would like to learn or improve?

Racha Al Khawaja: I would like to be a more confident skier. I already ski, but I would like to improve, especially since my daughters do slalom and keep trying to convince me to try it.