Baruch, I understand this problem. It is purely psychological. I will illustrate why: Imagine your trade, entering at 0. You are at 0, break even, null. Now, imagine trade is on a scale from -10 to +10, 20 points, OK? Now, look at it from a P&L point of view. What happens when price drops, what do you experience? Well, if you are the typical beginning trader, probably hope. You think it's fear, but it isn't. Fear is more like what it should be, although emotion is a no-no in trading altogether. So, what hope? Well, hope that the trade "may come back". You hope until the point of most pain, then you let go. At -10, your stop is hit and you're probably upset. You've taken your entire loss, and possibly more. Now I will illustrate the opposite of that scale. You are in the profit zone this time. Price goes up, goes up more. What happens this time? What do you experience? Hope? No! Why? Well, if you're the typical beginning trader, you will experience fear. Why? Well, you fear to lose your 'already gained' profits. After all, you had to hope so much during all your losers, and finally you've got a winner, so let's take it before it goes. But does this make sense? No! Ideally, it should be the exact other way around! you should fear the losses, and hope when in the winners! Most people don't. They hope with their losers and fear with their winners. This is the irony of it all, because your mind makes you do the exact opposite of what you should do! Do you see what I mean? This is the exact reason why 95% of traders fail. So, the question is: What can you do about it? Well, you don't really want to twist your mind to believe the opposite here. The key is to not let emotion affect you at all. Is this possible? You may laugh, after all your heart racing every time you enter a trade. Well I tell you what: You're up against a lot of traders out there who push 1,000+ lots all day long, without a tad of emotion! If you are emotionally affected, you will be but a dead fish in the water against them, because they will squeeze you until you exit - every time! Don't be the squeezed one. Go with the squeezers, and squeeze, preferably with volume! The scale analogy and fear vs hope, I just made all this up myself, but it's certainly very applicable, and you will find similar things in good psychology books. Again, I recommend reading Douglas to get a grip on this. He explains how to deal with these typical trading issues. Once you've mastered the most important bits of it, there's a whole new world open to you. Learn not to hope with your losers. Learn not to fear with your winners. This pretty much directly reflects POP's #1 & #2 trading rules... By the way, there's another thing I like to do (which kind of relates to the scale described above) - Don't think in terms of "winners" or "losers". This has a bad effect on your psyche. Instead, think in terms of "favorable excursion" and "adverse excursion". That's what I do. It's very subtle, but it makes a great deal of difference in terms of objective trade evaluation. It's better for you to think about "adverse excursion" than about "losers". Hope this helps, Scientist
Thanks is better than F Off, which is two words. You know the old question, is the glass half empty or half full?
Yeah, but then the former 1 word kind of implies the latter 2 words, in a polite but subtle sort of way.
"The speculator's chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you hope that every day will be the last day--and you lose more than you should had you not listened to hope--to the same pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and you get out--too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. he must fear that his losses may develop into a much bigger loss, and hope that his profit may become a bigger profit. It is absolutely wrong to gamble in stocks the way the average man does." ...... Jesse Livermore " The unsuccessful investor is best friends with hope - and hope skips along life's path hand-in-hand with greed when it comes to the stock market. Once a stock trade is entered, hope springs to life. It is man's nature to be hopeful, to be positive, to hope for the best. Hope is an important survival technique for the race. But hope, like it's stock market cousins: ignorance, greed and fearall distort reason. " ...... Jesse Livermore
Great quotes, Stardust! Love 'em! Amazing, it's the same stuff I just went in on... Probably said over 100 years ago or so?! It becomes clear that this is a very big issue. Certainly something every trader has to fight at some point or another. Where did you get this from? Reminiscences? Cheers!