What you mentioned is perfectly normal. Any trader who trades regularly must has encountered these situations, as have I. The problem is that as humans we have been brought up (conditioned is the right word) with the importance of “Hope”. In our life we face difficult situations, fall and then hope acts as a driving force allowing us mentally to stand up again and fight back and overcome the difficult situation. In real life hope is very necessary. Once we start trading, we start to act on the basis of how we are conditioned, and therefore hope kicks in too, especially when a positions is going against us. This hope that things might turn around soon is a dangerous thing in the world of trading! In the “realm” of the markets, “Efforts/Action ==> Results or Some Result” Does not work! Markets have an inherent element of Randomness especially in the short term. So how does one deal with the Market? Play the game of probabilities with it. How does one do that? Plan an Entry, Target and Exit for a trade AND keep Target at least 2 times that of the Stop Loss. So if your Target hits then then you make 2X and if your Stop loss hits you lose 1X. Now if Market is Random then Winners & Losers will be somewhat equal in number when you trade of a good number of times. So essentially, Win & Lose equal number of times AND Winner twice as large as a Loser, Result ==> Net Profit. But to make all this happen you have to take Stop Loss and Target Exits as exactly planned! If the Mind tricks you into “Hoping for a turnaround when position is getting in loss zone” then tell the Mind “In the realm of Markets Hope does’nt work only Trading Plan will work in the long term”.
Are all these just theory and smart chatter? Well, my personal experience says it’s not just theory, someone else may differ!
4 Likes