Archives of “rational decisions” tag

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Practice, Practice, Practice

  
  Education
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Let’s be brutally honest, there is no easy way to react to trading losses. If you are expecting me to give you a magic formula, then I am really sorry, as I don’t have one. Going trough losses is not easy because, for many, these are your hard earned money and of course it will be painful. However, every time you feel the pain from losing, you have gained new perspective to how “pain” feels like. From personal experience, I can honestly say this – it only gets easier because you start to know how your emotions will react and to a certain extend, you get immune to it.

Some would think that getting immune to losing is not a good thing. Agree, but you’re missing the point. When you are immune to losing, it is because you understand yourself better and you are better at managing your expectations and emotions. More importantly, when you are immune, you are emotionless and you can focus more on making rational decisions.  And that is the ultimate goal of staying positive.

Trading Loss

  
  Education
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Trading-Loss-1Losses are part of any type trading. Some are bigger and some are smaller. Every loss hurts, it does not matter whether it is big or small. Learn to respect them and try to minimize them.

A Planned ‘Entry’ leads to a Planned ‘Exit.’ Before you enter into a trade, you have plenty of time to think about Entries/Exits. Once you are in a trade, you have limited focus and may not make rational decisions for the exits (loss/profit).

If you have planned your trade ‘Entry’ with multiple entries/lots at multiple levels, then ‘ADDING’ or ‘Scaling Up’ is part of the plan. Adding is part your strategy. You must know ‘ADDING’ levels and size BEFORE you place your first order. You must also know how you plan to EXIT this trade.

If you are adding more shares/contracts because of a losing position and DID NOT PLAN then averaging down becomes gambling. Most traders blow out their capital by Forced-Adding process. This obviously leads to many psychological issues (Poor discipline, Gun-Shy:Afraid to pull-trigger, Overtrading, Premature Entries/Exits etc.) If you see a Loss at your ‘STOP LEVEL’, get out of the trade than ADD. Never HOPE that this trade will turn-around. 7 out of 10 times, it will NOT turn-around and will end up in a bigger loss. If you have planned ‘STOP’ ahead of your trade, you will feel confident during the trade and may come back to trading with cooler head at a later time/day, in case of a loss.

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