I dont know if paper trading can help with the psycology of taking loses. I believe this is learned through taking some nasty loses and learning your lesson the hard way. Or maybe through mental work like visualization.
seems like your problem is mainly due to mind managment. we cannot earn money if we are angry, nervous, vengeful, frustrated, wishy washy, reckless, fickle minded, ill disciplined, unable to stay focus. put simply, if the mind is not calm and alert, very difficult to earn money even if you have very good trade plan with all the vital information documented in stone/concrete. so controling one's mind very important. There are quite a few articles about mind management in ET.
The formula to "Positive Expectancy" involves (Win Ratio) X (Reward) X (Risk). So you can win with small losses and big losses as long as your win rate is high enough. Therefore I don't doubt your system is possible. I could do the same but generally I prefer the opposite. There are multiple ways to skin a cat and make money. Problem is (Frequency) becomes the deciding factor.
Then you're going to suck at being a discretionary trader . Go mechanical .. automated or not . and treat every trade like a woman .. always keep an eye on the exit door.
A question that's been asked many times on ET... "How do you make yourself do the right thing"? Relates to discipline. Many/most times traders are uneasy and have difficulty pulling the trigger (including stops)... fear of being wrong, fear of loss, uncertainty of outcome, et al. I don't have the answer.
Those are two different statements, neither of which is particularly inspired for its own reason. Collect your thoughts and try again. No rush; I can wait.