One of the major reasons why traders lose money is because they ride out their losses and close profitable trades too early.
While being patient can help us to achieve our maximum profit potential, being patient on the wrong side of a trade can be costly.
This is a great insight into why we are naturally predisposed to riding out losses and not quitting while we are ahead. It's an exert from a book that I recommend you all read called "Trading For A Living" by Elder Alexander.
"Roy Shapiro, a New York psychologist from whose article this subtitle is borrowed, writes:
'With great hope, in the private place where we make our trading decisions, our current idea is made ready....one difficulty in selling is the attachment experienced toward the position. After all, once something is ours, we naturally tend to become attached to it....This attachment to the things we buy has been called the "endowment effect" by psychologists and economists and we all recognize it in our financial transactions as well as in our inability to part with that old sports jacket hanging in the closet.
The speculator is the parent of the idea....the position takes on meaning as a personal extension of self, almost as one's child might....Another reason that Johnny does not sell, even when the position may be losing ground, is because he wants to dream....For many, at the moment of purchase critical judgement weakens and hope ascends to govern the decision process.'
Dreaming in the markets is a luxury that nobody can afford. If your trades are based on dreams, you are better off putting your money into psychotherapy."
If your trades, before you enter them, do not have predetermined take levels and stop loss levels, then you are setting yourself up to fail.
Sitting really does make money, but before we sit, we must first SET and FORGET.
Happy trading,
AvidTrader
While being patient can help us to achieve our maximum profit potential, being patient on the wrong side of a trade can be costly.
This is a great insight into why we are naturally predisposed to riding out losses and not quitting while we are ahead. It's an exert from a book that I recommend you all read called "Trading For A Living" by Elder Alexander.
"Roy Shapiro, a New York psychologist from whose article this subtitle is borrowed, writes:
'With great hope, in the private place where we make our trading decisions, our current idea is made ready....one difficulty in selling is the attachment experienced toward the position. After all, once something is ours, we naturally tend to become attached to it....This attachment to the things we buy has been called the "endowment effect" by psychologists and economists and we all recognize it in our financial transactions as well as in our inability to part with that old sports jacket hanging in the closet.
The speculator is the parent of the idea....the position takes on meaning as a personal extension of self, almost as one's child might....Another reason that Johnny does not sell, even when the position may be losing ground, is because he wants to dream....For many, at the moment of purchase critical judgement weakens and hope ascends to govern the decision process.'
Dreaming in the markets is a luxury that nobody can afford. If your trades are based on dreams, you are better off putting your money into psychotherapy."
If your trades, before you enter them, do not have predetermined take levels and stop loss levels, then you are setting yourself up to fail.
Sitting really does make money, but before we sit, we must first SET and FORGET.
Happy trading,
AvidTrader