Illiquid, What turned my trading around was not caring! Not that I don't care, but I was too protective of my capital. I look at it like this, you have to give up control to get control. Have fun or try to have fun even if you're loosing $. Once you can get control MENTALLY you will have the edge! The edge is in the traders mind, not some secret formula (that is why so many people can make money doing different strategies). I know what you're going through and if I made it so can you. YOU CAN DO IT!
I lose money net, about once, but no more then twice a month. I used to take the hits you were talking about, but I did several things to change that. 1. I use stops on every order, no exception. 2. Every trade I enter, I know exactly where the loss cut level is, and I use a stop to prevent myself from taking a big hit. 3. If the day isn't going the way I want it to, and I keep getting stopped out for small losses, I cut my starting position in half. If the positions start to work, I size up quickly, and begin using my usual starting size. This allows me to keep my losses contained, so I can make them backeasily when trading picks up. 4. I don't believe in max loss. Just cause the morning is not going well, doesn't mean that the afternoon won't get better. That's why point 3 is important. 5. Everyone once in awhile I still lose my mind and take a big hit on a day, but everyone's human. This happens to me every couple of months, and the size of the hit is usually my average days gain. 6. Keep your days losses to 1/2 your avg. days gain. This way you can come back tomorrow, make back your loss, and put money in your pocket. 7. If you're consistent and you run into 2 days of losses, and you know it's because you're not following your own rules, point 5, then take a couple of days off. It does wonders, trust me. Hope this helps, it made me into a consistently profitable trader.
One thing I can say is: 1. One trade for a beginner is equivalent to series of 50 trades for me. Meaning if I'm down after 50 trades, I'll start thinking but hasn't happened, statistically impossible. "Statistically" 2. Utility Theory, Risk of Ruin, Equity Curve Analysis is all part of my system quantified. It's just following the thing. It's all already considered, and statistically inside it. 3. Psychologically, because of my system, I can always lean to "just" following the system. Also, each loss isn't really bothering. There's other things that are bothering for me than taking a loss.
There are some remarkable statements and confessions here. More than any other trading mistake, hanging on to a losing trade demoralizes the soul like nothing else. The mind keeps repeating, "if only I had..." and "why didn't I follow my..." Not taking the "siganalled" trade that turns into a big winner is second, but not nearly as demoralizing. I have only been trading again fulltime for almost 4 years. I have never traded part-time. During the first two years I held on to three trades too long. Way past my stoploss. They killed me psychologically for awhile. The money wasn't as important as the fact that I let myself down. If anything, I used to take the loss too quickly. If the trade didn't go in my favor right away, I wanted out. And got out. Only to see the thing reverse and move ahead as anticipated. This too was demoralizing. Sure I was taking small losses, but not getting the profits. My solution was using some OBJECTIVE entry point - something that said I was right or wrong. No guesswork, no interpretation. Either I should be in or out. And I used the close of the bar only. Anything else is noise. Everything else is noise. So I had to find stocks whose average bar range, whatever time frame I was trading, was such that it usually wouldn't kill me to wait until the close of the current bar. That was the amount I was willing to lose. Winning trades feel great. Perversely, getting out of a loser feels almost as good. You guys know it. When you finally cut that loss, your whole body relaxes. You think clearly again. Joeystox is right on it, cut that loss. Quickly. Get out. Reassess, get out with $99 of $100 instead of $60. Tell the market "No you may not have my money. But I will have yours." I think a great execise is to earmark $1000 or so for losses and take every trade as strict as you can. Already know in your mind that you have thrown away the grand. So take every loss RIGHT NOW. You don't care. Your goal is to engineer good trades. When it is not a good one, get out RIGHT NOW. Your goal is to engineer good trades.
I am the best loss taker in the world. They should write a book about me. It doesn't matter, hard, mental, fixed or trailing, I know how to use them and I'm an expert. I mean I'm world class. I am the best there ever was and anybody wants to put up real money and trade beside me I'll show you I can take losses better than anybody. Try if you want, but nobody will ever beat me. I'm the best loss taker that ever traded the market.
I have no problem with a trade getting away from me. I always put in a stoploss after entering a trade and I never remove it. I am religious about this. My problem is my daily stoploss. I never keep that. I wish there was a way to place a mechanical daily stoploss. Someway that would shut my account down at a certain loss. Unfortunately this is not possible. I am dealing with it now by cutting down on the number of trades and being extremely cautious at the opening so that I do not get in the hole early. I am following the advice of Nihaba and Brandon about trading one setup only and I have chosen one that only appears a couple of times a day. This should keep me out of trouble. So far, so good.
I am also very strict with my stop losses, I feel the worst place to be is beyond your stop. Once you blow your stop emotions take the better of me and crazy shit can happen, that is why I try not to blow it. I have been working with a daily stop loss/gain which has helped me not to revenge trade and give profits back from overconfidence....I think my stop gain stops me from pushing forward but in the long run it helps more than it hinders at least in the stage Im in.........emotional wise; I'd rather not make more than give a big chunk back....
Having one of your friends die before it is their time is what I call a "loss." Having to experience almost losing your father from a heart-attack is what I call a "loss." Losing money in the market is what I call learning.
That goes to show that its all in the way you look at it.....Having to experience almost losing your father from a heart attack....is a gain to me........its good to know he is still with us, wouldnt you agree????