Hey! - I believe the guy! Look at how he just keeps digging himself deeper and deeper into this 'hole' of a thread he started! BelligerentPoseurtrader, off to Ignore with ya'...
Loss aversion has nothing to do with it. You let a loss grow because your a idiot and don't know when the trade has reversed. AND there is a industry that makes $$$ from your blatant stupidity. (http://bostontechnologies.com/docs/Business_Plan.pdf) If you don't know when to close your trade, you don't know your risk. If you are not willing to set a pre-determined $-amt that you deem is a "comfortable" loss-- then you shouldn't be trading.
I slightly disagree. Losing small is a necessary part of winning: if one is not willing to lose small, then in the long run one cannot win big.
For what its worth, the original post describes my trading perfectly. The reason I move my stop when a trade goes against me and hope (a very bad word in trading) the market comes back and bails me out, is because it has done exactly that so many times. This reinforces the very bad habit of not taking a small loss and eventually you will take a very large loss. Then when I take the large loss I say "I will never do that again". So I start taking small stop losses and watch as the market takes me out just to go back in my favor. I then begin to break my rule of never moving my stop and then BAM! I'm stuck in a position with a large loss and eventually have to take it. And of course I say "I'll never do that again". Well, personally, I'm on my second "I'll never do that again". That's just my experience. I hope this will help any newer traders or struggling traders to really believe that if you do not take your first small stop (like we have read or heard so many times before yet not truly bought into it) that eventually you will take that mother of all stops. I've done it twice.
low self esteem, work it out from there. Little long to explain, but i've been there, done that, and now making the t-shirts indeed, not self aceptance of mistakes ( a wrong trade is that ) means low self esteem. regards
If I may offer you some advice: you are trying to "force" yourself to take small losers and honor your stops, because your logical mind knows that this is the right thing to do - however another part of your mind clearly doesn't believe it. If you think about it, the only reason you need to "force" yourself to do anything is because something within you doesn't really believe that it's necessary - hence the internal conflict. Deep down you really haven't fully seen and understood the reasons why small losers are necessary, even though your conscious mind knows it. The solution is not to force yourself to take losers, the solution is to eliminate the desire to be right on every trade. Ask yourself this: do you have to stop yourself from taking a knife and jabbing it into your leg every day? No? Why not? Because you have accepted on a mental AND a gut level that this activity is detrimental to you, so you don't do it. In fact, it is so ingrained for you NOT to do this, that you never even think about it. I bet you could have gone the next 20 years of your life without even thinking of something like what I described, if I hadn't just brought it up. In the same way, you need to really see and accept on a gut level that not taking small losers is incredibly harmful to your account. It's not enough to believe it on a mental level, you really have to believe it deep down. Think of your small losers like you would think of health insurance - it's a small cost that you pay every day to avoid disaster. You wouldn't want to live without health insurance, right? Most people have health insurance, and most people never fully use it. But what if you need to? It would be a disaster not to have it. In the same way, most of the time not taking stop losses will be rewarding by giving you back your money when the market returns to your price, but the few times you really need it, you're going to regret not taking that small loss. Statistically you are 100% guaranteed of failure if you don't take stop losses. No trader in the history of the markets has ever failed to blow out his or her account if they kept trading consistently without stops. So if you think about it, not taking those stops is essentially guaranteeing that sooner or later you will lose all your money. Why would you want to enter a situation with a 100% chance of failure? If you think of it that way it might help.
Thanks FB123. I also want to thank BPtrader for starting this thread even though his intentions aren't clear as to why he started it. Regardless, I have benefited from it none the less.
I have a different perspective..I expect to be wrong on every trade.. How could I possibly jump in the middle of all this and be right? Who the hell am I? I'm amazed that most of the time I AM RIGHT.