Thank you for all your responses. I'm going to answer all of them in this post: I understand that the market has a bias for long trades (some platforms don't even allow you to short while others have limited inventories) but I feel more comfortable shorting than going long. The thing is that shorting is usually very lucrative for me until I run into that scenario where the price jumps against my direction by 30-40+ cents suddenly and I can't exit out of the trade due to this psychological fear of losing. I'm usually good with cutting my losses. My main problem is when the price suddenly jumps against my direction unexpectedly. I then get stuck in a thought-loop where the losses continue to increase while I rationalize to myself that I should stay in the trade because a reversal is just around the corner. As for options, I have bought both puts and calls (and they are very lucrative!) but my problem as a daytrader is that most of the gap up/down stocks I trade aren't optionable. Lastly, I agree with you about the stop. I'm going to start setting a stop-loss for all my trades starting today. I didn't do it before because the people I learned trading from cautioned me against using them because brokers exploit that information. I used to trade 1000 shares (and on certain occassions upto 2000 shares) but I dropped down to 800, then 400, and now I currently trade only 500 shares. I get your point but it's difficult to make any real amount of money with less than 500 shares. If I were a swing trader than I could possibly get away with 300-400 shares. As for your journal, thanks, I'll check it out. Yeah, I know all of this on an intellectual level but when I'm down 30-40+ cents some very primitive emotions come out and prevent me from trading rationally. I agree with your point about creating a good trading system. Yeah, through analysis of my trades and habits, I've realized that I have a fear of losing along with bad habits that surface every 3-6 trades. Sometimes I go on winning streaks lasting 6-7 trades and then predictably my one big loss wipes out most, if not all, of my gains. I really like this bit of advice, thanks. I don't trade forex; I trade NASDAQ stocks. As for taking a break, I used to do that: lose big, stop trading, read books about trading and trader psychology, and then start again. The problem with this approach is that sometimes that break last 1-2 months and I don't want to take anymore breaks. I just want to come to terms with this problem and move on. I day trade patterns like double tops so usually short selling is very profitable for me. It's just that every couple of weeks, I come across a stock that suddenly jumps against my position and causes me to become 'paralyzed' by fear of losing. But I get your reluctance to not short stocks.
"Bingo!" Mystery solved. But aside from that, your handle on things (posted above) seems pretty solid.
When you are not doing well, you should set aside some time. I suggest the weekend and review your trades one by one and use a stockchart to see if you made mistakes. Chances are good you did! Write those mistakes on your journal. Makes it easy to refer to in the future if you continue to make the same mistakes. Correct those mistakes and you become a better trader overnight!
%% IF you keep trading counter trend, stocks , rational DT; or even trend trading without any stops. You will solve your own problem, because you will eventually run out of money.[My remark does not apply to people going long ETFs/strong ETFs with a plan for selling + proper money management........] AND stop pretending ANY business can exist without any business expenses[=losses]Thanks for the question.
Put in a hard stop loss on the trade and don't override it. Or to go further, use a system with a fixed stop (or max stop which can be closer based on PA, but never wider than the max) and mechanical profit target to remove the discretionary aspect of "mental stops" or exits, and the emotional roller-coaster of trying to decide what to do based on every tick of the market. If you can't at least respect a defined max risk in the form of a hard max stop then you can't be a trader, so you just have to sack up and do it.
This is complete BS. Forex bucket shops maybe but not exchange-traded instruments through regulated brokers. Look at any chart and there's no mystery at all about where clusters of stops are placed. Even if someone could actually see the stop orders and trade on that information, your small-lot order isn't going to make the slightest difference to their decisions unless you're trading very illiquid issues. Because stops do cluster at swing levels, stopruns happen and have to be accounted for in your plan. If you are getting barely clipped out of too many trades then you need to use a wider stop or filter your entries (e.g. pass on the first signal then enter after the stoprun of that first signal).
Let's get this straight: 1) You state that you "destroy my account every couple of months" 2) This is due to a short moving against you in the 40 cent range 3) You state that you are only trading 500 shares as of now. So, 500 shares X 40 cents = $200 loss If this is all true, please explain why do you even bother.
Attempting to overcome fear keeps fear present as something to be overcome. Focusing on building trust and confidence leads to a different timely action.
It is not what you are using, it is about to understand , accept and adopt the process you are going through. Nothing is wrong with you, and many of us passed the same stage before we were able to create consistant profit. We all were raised to believe and to struggle to be right. So it is just one of the first steps of the trading life - to take it easy, to promptly admit that you may and can be wrong, and to liquidate your position. Very important - train yourself on simulator account, impose to yourself daily/weekly limit of loss, and if you touch that, cut it firmly. You may help yourself with an automatic system. And, as you already was advised here - quit for some time live trading, for a day, week. Good luck! It is just a step on the path. You certainly can and will be profitable.