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.