I’m sure I’m not very unique. I look at a chart and think I can bend the market to my will. I stay in losing trades because I just know it’s about to turn around. My ego gets bigger with every winning trade – despite the fact that I was merely lucky. I can go on and on….
I just blew yet another PA account over at Apex Investing (coupon code: DVAGSURH) . This one was promising. I had reached the $2,500 mark in just three days.
And then it happened (again). I got into a trade that started going against me. My stop was just above a point of support so I instinctively moved it just below that level.
Another minute or two went by and the price was dangerously close to my stop, but I left it there knowing that it was the smart thing to do. To take the loss and live to trade another day.
The price hovered for a while and then started to move in my direction! Go! Go! Go! Finally, I’m in profit, but still a few points away from my target. The pattern on the screen screams at me that we’ve reached a level of resistance and I should exit now.
But I’m greedy. It can get there! Just hold on….
Of course, there’s a sudden reversal and price is dropping like a rock toward my stop loss. I’m convinced it’ll return back to profitability, so I move my stop below the next level of support.
I resolve to take advantage of that level of support when it gets there by adding in another buy order – so, of course, I can recoup my losses in half the time!
As price approaches my stop, I’m ready. In goes the next order. I’m down a lot, but I can recover!
Uh oh. It’s going the wrong way again. The chart is telling me there’s probably going to be a liquidity sweep, but then will go back in my direction! I’m going to be rich when it does!
So, I move my stops a little lower so I don’t get stopped out.
The sweep happens – just like I predicted – and the price starts to move back up. Maybe on the next pullback, I’ll add one more position because I can clearly see it’ll be smooth sailing from here.
At this point, I’m dangerously close to blowing the account. If I just hang on, it’ll come back. But if it goes against me, I feel I’m at the point of no return. So I delete my stops and pray for the best.
Once again, the market has different plans for me and the account is quickly blown.
The self loathing is all too familiar. Why didn’t I get out with the early loss and live for another day? Why do I do that?
I’m sure I’m not alone in this journey. I’m sharing this thought process because I think it’s important to know I’m not alone. The bottom line is trading is pretty easy. It’s the mental game that’s tough.
For me, understanding that exiting a losing trade has only one small cost – the commission. If I expect there to be a dip before reversing – I should get out and wait for it. I mean, why take that loss?
I think it’s because of FOMO. I fear the price will reverse as soon as I accept the loss. While that may happen, I need to relax and understand that there’s PLENTY of opportunity for another high probability trade. Why hold on and HOPE this losing trade turns around?
The mental game moral is Get Out and Live!