Sometimes, it’s the right thing to do. Traders must learn to honor stops and accept losses — that’s just part of the game.
Honor Your Stop
Why is it so hard to honor your stops? It is because we are taught not to quit in life. In trading, quitting is often the thing to do. If you are new to trading or lack discipline, you must place actual stops. You cannot say that you will exit the market if it goes against you by X amount and then sit there like a deer in the headlights as the market blows past that stop.
Placing actual stops makes your decision a passive one and not an active one. The market will make the decision for you if you are wrong.
Once you gain experience, confidence and discipline, you can use mental stops to help avoid being stopped out under certain specific conditions. However, when learning or having difficulties following your plan, you should place actual stops.
View A Potential Loss As A Cost
There is a cost to doing business in any field. You will have to pay for office supplies, computers, printers, and inventory if you are selling something tangible. When you run low on supplies or inventory, you accept the fact that you have to buy more. A loss in trading must be viewed the same way. It is simply the cost of doing business.
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3 Rules to Master Risk and Uncertainties
1. Overcome Fear
Great traders know that fear can choke our decision process and cause us to avoid taking risks. Fear also can paralyze you when you need to act quickly and decisively to save yourself from danger – the deer-in-the-headlights syndrome. All great traders have mastered their fears and are able to act decisively when needed.
2. Remain Flexible
As a trader, you never know which stock or which market may make a move. This is the essence of uncertainty. You don’t’ know what is going to happen. When you don’t know what is going to happen, the best strategy is be ready for anything.
3. Prepare To Be Wrong
If you don’t know what the future will bring and you choose a trade that assumes a particular outcome, you are possible going to be wrong. Depending on the type of trade, in many cases it can even be more likely that you will lose money than that you will win money. What matters in the end it the total money won and lost, not whether you are right more often than wrong. Great traders are comfortable making decision when they know they could be wrong. –
4 Rules from Great Traders
Overcome Fear :Great traders know that fear can choke our decision process and cause us to avoid taking risks.Fear also can paralyze you when you need to act quickly and decisively to save yourself from danger-the deer-in -the-headlights syndrome.All great traders have mastered their fears and are able to act decisively when needed.
Remain Flexible :As a trader ,you never know which stock or which market may make a move.This is the essence of uncertainty.Your don’t know what is going to happen.When you don’t know what is going to happen ,the best strategy is to be ready for anything.
Prepare to be wrong :If you don’t know what the future will bring and you choose a trade that assumes a particular outcome,you are possibly going to be wrong.Depending on the type of trade,in many cases it can even be more likely that you will lose money then that you will win money.What matters in the end is total money won and lost ,not whether you are right more ofthen then wrong.Great Traders are comfortable making decisions when they know they could be wrong .
Focus on decisions ,not out comes :One of the reasons that great raders can so easily reverse course is that they have a more sophisticated view of the meaning of error for decisions made under uncertainty.They understand that the face that things did not turn out the way they had hoped does not necessarily mean that taking the trade was a mistake.They know that many times good ideas dont’t work out.The very presence of uncertanity ensures that you will be wrong some of the time.All great traders put trades on for a particular reason ,and they take them off for a particular reason too.Great traders focus on the reasons for the trades instead of the outcomes for few given trades.