Why It is hard to Hold a winning position. ?
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Suppose You took a trade ,bought 100 quantity at price 100 , with a SL : 80, and Potential target of 120,
Now what happens it goes up to 105 (you think your analysis is good let us wait)
Then it come back to 100 went further down till 90 (you thinks it is ok we have to give it room)
Then it went up above your buying level till 115 (now your target is 120 you are just 5 points away, what will come into your mind?)
Then suddenly sharp selling starts and you got your SL triggered.
More or less the PnL whipsaw, take you to the moon and within seconds, it drop you down. The PnL whipsaw creates dynamic changing emotions into your mind.
Am I correct or not till now, feel free to comment. ?
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Let us more about some pre-set emotions which comes out and affect our decision making with open position.
1) Fear of Losing the open position’s profit :
See everybody want to win nobody want to see himself of herself as a Loser in the mirror , when you take a trade you always think that it is going to give you profit (subconsciously), with such a biased mind the open position PnL affect your decision making. You get so much attached with the running profit that you start thinking like that it the profit you have already booked and feeling that it is your released profit, now you are “not willing to let it go” because you now attached to it emotionally (psychologically).
This type of fear arises from our belief system and past experience developed over previous trades. The social culture, family atmosphere also can be the reasons.
“If You think you are a risk taker than you must thanks God , because everybody do not have such brave heart.”
Advice: “Let it go”, the open position’s PnL, is not yours, it is the released one that counts. Believe in your system and let the target hit or trailing SL get triggered (SL according to your strategy).
2) Past Experience (Fear intensifies when have a very bad experience earlier)
Students approaching me for learning trading psychology ask me why you ask us about our past experience and track sheet, they do not want to recall, but their past experience and the track record tells their complete story , it tells everything what is the problem with their trading , what need to correct immediately what are the strong weak part of their psychology.
But why: Because past experience shapes our psychology. If you have witnessed a series of trade where your target is missed by few ticks and you have to book SL. Then you start thinking about your exit style, you think is there any improvement needed. At this point of time you again shift from this strategy to that strategy. If you are trading from a while then you can understand the gains we make are not smooth sometimes great sometimes they are worse. If you think there is a holy grail strategy you will spent whole life searching it, but still remain empty hand.
Advice: You have to realise that having continuous losses in a row can happen frequently as, you cannot avoid losing streak, even the professional traders have their losing streaks going for 2 , 3 weeks. You came here not to trade 1 week , 1 month or 1 year , you must have a long term view.
3) Lack Of Clarity :
If you are among those traders who always have a very sceptic view about trading, have knowledge and experience but , do not see it as a sustainable business, thinking that you cannot rely on trading income. You will develop a tendency to book early. Because holding a winning position requires a courage which comes from clarity.
I met a research analyst managing his client’s portfolio giving trading and investing recommendations to his clients on regular basis for more than 5 years. I asked him why you selling your valuable advice when you can profit from it. You know what he said to me, it is shocking for me he said , Nobody make money in trading. He do not believe in trading business even though having his bread and butter by selling his advice.
It is worst how you can sell your recommendations when you personally feel that nobody can make money. Is it not contradictory?
Advice: If you do not have clarity about your trading system, you cannot trade confidently and this one thing alone can derail you from your trading plan. So spent time reading, listening to various successful trader, know their story their style, the more you read listen the more you will get the knowledge and clarity.
4) Complacent with the Current profit :
I think this is the worst problem happening with you because if you are very complacent you will end up booking very small and losing big ultimately your equity curve will go down slowly. This happen to novice traders who want to make some extra income, they see that open position profit is enough for their one day or two day expenses they close their positions immediately.
Note: Have you seen people doing a mediocre job or their father’s small business even they have the potential for a bigger goals. Booking small profit frequently makes us convinced that what we are doing is great because we see a streak of winning trades.
Reason: Simple reason of it is than, we tend to apply our day to day life logics here, we are unable to see the potential and avoid systematic approach.
Advice: Your strategy is developed according to the profit potential, risk management not for your day today expenses or complacency level. Stay goal oriented make small, short duration goals and see a series of trade at a time not stuck your mind in single trade.
5) Lack of acceptance:
When you do not accept loss you will always try to avoid it this is the main reason why people sit tight will their losing position but cannot hold their wining positions.
Reason : Arrogance, Confusion, less belief.
Advice : You can make profit or loss on a particular trade depends on market situations. Recall this before creating every new position. Just follow you system.
----------------------------------------
Suppose You took a trade ,bought 100 quantity at price 100 , with a SL : 80, and Potential target of 120,
Now what happens it goes up to 105 (you think your analysis is good let us wait)
Then it come back to 100 went further down till 90 (you thinks it is ok we have to give it room)
Then it went up above your buying level till 115 (now your target is 120 you are just 5 points away, what will come into your mind?)
Then suddenly sharp selling starts and you got your SL triggered.
More or less the PnL whipsaw, take you to the moon and within seconds, it drop you down. The PnL whipsaw creates dynamic changing emotions into your mind.
Am I correct or not till now, feel free to comment. ?
---------------------------------------------
Let us more about some pre-set emotions which comes out and affect our decision making with open position.
1) Fear of Losing the open position’s profit :
See everybody want to win nobody want to see himself of herself as a Loser in the mirror , when you take a trade you always think that it is going to give you profit (subconsciously), with such a biased mind the open position PnL affect your decision making. You get so much attached with the running profit that you start thinking like that it the profit you have already booked and feeling that it is your released profit, now you are “not willing to let it go” because you now attached to it emotionally (psychologically).
This type of fear arises from our belief system and past experience developed over previous trades. The social culture, family atmosphere also can be the reasons.
“If You think you are a risk taker than you must thanks God , because everybody do not have such brave heart.”
Advice: “Let it go”, the open position’s PnL, is not yours, it is the released one that counts. Believe in your system and let the target hit or trailing SL get triggered (SL according to your strategy).
2) Past Experience (Fear intensifies when have a very bad experience earlier)
Students approaching me for learning trading psychology ask me why you ask us about our past experience and track sheet, they do not want to recall, but their past experience and the track record tells their complete story , it tells everything what is the problem with their trading , what need to correct immediately what are the strong weak part of their psychology.
But why: Because past experience shapes our psychology. If you have witnessed a series of trade where your target is missed by few ticks and you have to book SL. Then you start thinking about your exit style, you think is there any improvement needed. At this point of time you again shift from this strategy to that strategy. If you are trading from a while then you can understand the gains we make are not smooth sometimes great sometimes they are worse. If you think there is a holy grail strategy you will spent whole life searching it, but still remain empty hand.
Advice: You have to realise that having continuous losses in a row can happen frequently as, you cannot avoid losing streak, even the professional traders have their losing streaks going for 2 , 3 weeks. You came here not to trade 1 week , 1 month or 1 year , you must have a long term view.
3) Lack Of Clarity :
If you are among those traders who always have a very sceptic view about trading, have knowledge and experience but , do not see it as a sustainable business, thinking that you cannot rely on trading income. You will develop a tendency to book early. Because holding a winning position requires a courage which comes from clarity.
I met a research analyst managing his client’s portfolio giving trading and investing recommendations to his clients on regular basis for more than 5 years. I asked him why you selling your valuable advice when you can profit from it. You know what he said to me, it is shocking for me he said , Nobody make money in trading. He do not believe in trading business even though having his bread and butter by selling his advice.
It is worst how you can sell your recommendations when you personally feel that nobody can make money. Is it not contradictory?
Advice: If you do not have clarity about your trading system, you cannot trade confidently and this one thing alone can derail you from your trading plan. So spent time reading, listening to various successful trader, know their story their style, the more you read listen the more you will get the knowledge and clarity.
4) Complacent with the Current profit :
I think this is the worst problem happening with you because if you are very complacent you will end up booking very small and losing big ultimately your equity curve will go down slowly. This happen to novice traders who want to make some extra income, they see that open position profit is enough for their one day or two day expenses they close their positions immediately.
Note: Have you seen people doing a mediocre job or their father’s small business even they have the potential for a bigger goals. Booking small profit frequently makes us convinced that what we are doing is great because we see a streak of winning trades.
Reason: Simple reason of it is than, we tend to apply our day to day life logics here, we are unable to see the potential and avoid systematic approach.
Advice: Your strategy is developed according to the profit potential, risk management not for your day today expenses or complacency level. Stay goal oriented make small, short duration goals and see a series of trade at a time not stuck your mind in single trade.
5) Lack of acceptance:
When you do not accept loss you will always try to avoid it this is the main reason why people sit tight will their losing position but cannot hold their wining positions.
Reason : Arrogance, Confusion, less belief.
Advice : You can make profit or loss on a particular trade depends on market situations. Recall this before creating every new position. Just follow you system.
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