Why It Is Hard To Hold A Winning Position. ?Why It is hard to Hold a winning position. ?
----------------------------------------
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.
Tradingpsicologia
Which type you belong.?The best way to find the type of trader you are is to see the capital curve,(or equity curve) over time into your trading account. Over time it may increase or decrease depending upon your performance but the way it is increasing and decreasing will give you an idea of where you are going, towards a professional trading or still in the 95% of crowd, who overall lose money.
------------------------------------------------
Type - 1
Big Loss
Small Profit
You will not believe me I observed ledgers of many traders where I found that this category has the majority. Some lose there entire capital in just 20 to 30 trades their losing trades are so capital disruptive that they soon get out of the game.
The reason are many but one common reason I found in such traders that , they do not accept that they are on a path of failure. They always get crazy about their accuracy ,(as if you book small profit and big loss than your accuracy will be excellent) . One more problem is their search for a HOLY GRAIL.
My advice: May be this game is not for you. Try something else than trading, (Bitter advice but what can I do the reality is that this game is very hard)
-----------------------------------------------
Type - 2
Big Loss
Big Profit
Now this category is of those traders who enjoys this game, their main reward is not monetary reward the innate thrill of this game, gives them so much pleasure that they can resist themselves.
Reasons why they tend to behave like that are many but I think, they play the main role for prices to rally fast they make market uncertain and high volatile.
Ultimately they lose money but they are not concerned.
My advice: May be you , do not need any advice , You need Introspection
-----------------------------------------------
Type – 3
Small Loss
Small Profit
This type is of that trader who had a bad experience in the market and now they want to improve their trading they read books follow gurus . They always are in a search for holy grail . Though they ultimately lose money but I like this type of trader because they at least accept loses. They at least cut down the main hurdle. They survive long.
Advice: You accept small losses but why exiting early manage your emotions follow plane believe in plane, that’s it. Just allow trade to run in profit.
----------------------------------------------
Type – 4
Small Loss
Big Profit
This type of traders are the pro ones their entry is difficult but exit is marvelous , rest of the traders shuffle a lot while exiting from a trade but this trader they are genius in it. They make plane, execute them, flexible with plane, accept mistakes … etc
Advice: Sometime you may feel boring as the trader life is not a social life , after seeing all whipsaws in your trading journey you may feel tired but always remember there is yet many milestone to achieve, this is just a beginning.
----------------------------------------
The trading is a negative sum game , here one's profit is a loss of other. This is like battle where traders fight with their conflicting opinions at the same time simultaneously.
So keep your fighting spirit up .
Situations which shakes you emotionally ,Why & How ? There are Four worst possible situations may happen even in a series of trades which can shake you Psychologically.
==================================================
1) After hitting your SL market straight goes in your favour --->>
You know prices are not random always, the patterns, support, resistances, trend line concepts works well but for whom. ? and how ?
Suppose you found a crucial support level and taken a buy position with stop loss just below the crucial support.
You have placed your SL at correct place no doubt about that, but do you know such levels where most of the people may place their SL or may panic and exit their positions can be predictable.
Second , If you are playing trends and created a long position , can you exactly guess the prices do not correct till your SL level .no …
Third , This may conflict with first one but believe me most of the time prices are random, market do not know you exist. The logic you inculcate for the upcoming move may not valid even if the movement happen exactly the way you predicted.
Now you will surely ask, is booking SL is a good Idea or not. ?
Answer : Yes It is a good Idea to book SL , even if market goes in your favour after taking SL.
Reason : See you cannot analyze all factors which are affecting price now. No system strategy is 100% accurate. You may see a series of trades where after booking SL prices going in your favour. You may think there is some problem with my strategy (even if you have properly back-tested it) or is there any need to change something.
Believe me this is normal ,such situation you cannot be eliminated completely. Even an experienced trader goes through it.
"In life we regret of quieting things early, we think if I had carried those things a little bit further instead of quieting , results may be drastically different"
Key Takeaway : Accept such things do not give up seeing multiple sl in a row. Because shit happens….
==================================================
2) You See Your Target Missed Just By One Tick ==>>
It is normal do not panic have you not seen in cricket team winning and losing just by 1 run .
""There are many couples where we see that one is healthier than other. When the unhealthier one become sick everybody thinks what will happen to the healthier one if he or she dies , but unhealthier survives and healthier dies first. It is just like you thinking that prices moving in your favour and your target is very close and suddenly something happens and SL triggers."
Note : Accept that such things may happen and you can't do much about it. It is Okay
==================================================
3) After You exited the price went further in your favour without taking SL ===>>
This happen with me all the time and deeply frustrate me I can take SL and relax but I cannot relax in this situation where I exited just seeing profit and prices went straight without hitting my SL level.
See any advice for such situation depend on your risk and reward ratio. If you have booked a decent risk reward then prices goes up or down , not a point to worry.
If you booked very normal risk reward and then , you have to work on your psychology. See holding a open profit position takes more courage than holding a loss making position.
If you are doing this mistake again and again It shows one clear thing about your psychology "your have less courage."
Harsh but true........
Note: Work on your mindset .
==================================================
4) You get Frustrated with flat market Exited Early ===>>
See most of the time market remains flat it is a fact. If you getting frustrated with this nature of market. You should learn to be patient with your open position.
Note : You just place SL and Target that's it.
==================================================
Acceptance is the key , if you getting good results changing your predefined well back-tested ,proper risk reward giving system ,it does not mean you doing right thing. Many times you make profit by just taking random trade setups. It does not mean random trading works. Even a layman can predict market movement correctly in a series of days.
If you getting Bad results it also does not mean you doing wrong things.
==================================================
