You go long. Stock tanks. You hold. You hope it goes up. Human nature is to have hope. You short a stock. Stock goes up. Fear is in your heart. There is no hope. You don't hope it will come down, you fear it will continue to go up. It is easier to cut your losses on hope or fear?
Actually its greed and fear. Tanking stocks create fear. Stocks up big on news create greed. Fear is stronger then greed. John
Quote from Nutmeg: You go long. Stock tanks. You hold. You hope it goes up. Human nature is to have hope. You short a stock. Stock goes up. Fear is in your heart. There is no hope. You don't hope it will come down, you fear it will continue to go up. It is easier to cut your losses on hope or fear? ________________________________________ In my humble opinion it's neither, fear & hope is a losing proposition over time. A trader that utilizes these emotions & expects to have stellar results is remote, a more likely scenario is a short lived trading career.
You are attributing two different emotions to the same phenomenon: specifically, experiencing a drawdown. I don't see a lot of sense in that. I go short to make money & I go long to make money. When it doesn't work out, regardless of the directionality of the trade, I'm not all that satisfied. Hope? Fear? I would've thought that proper risk management had pretty much removed them from the equation.
Money management isn't going to help you feel much better if you get 10 losing trades in a row, even small ones. After a while you question the efficacy of your system, assuming you have one, and that's when despair sets in. It's not necessarily about the money, in which case position size or stops won't help. Sometimes it's about being right and having the self-confidence and faith in your system to keep trading.
If you do more research on a stock after you own it, to keep convincing yourself its a good position, than before you bought it, that's when you should get out.
"You are attributing two different emotions to the same phenomenon: specifically, experiencing a drawdown." I understand. Mastering your emotions. It wasn't until I shorted a stock and began to respect fear that I was able to learn to cut my losses earlier. The trend of the market is up so there was always hope from a loss if you have enough time, that was the monkey.