This is one of the worst mistakes new traders make (I know from vast, often painful, experience in my youth). I remember playing the game of hoping my Dollar Index positions would turn around when I was first starting out in the trading pit; they rarely did. Wishful thinking is not a good trading strategy—being disciplined is. Not having a well-thought-out game plan and strict trading rules is truly a recipe for failure.
Often new pit traders in particular will get hit hard and then become overly cautious. They resort to taking small profits even though those miniscule gains might have turned into a large profit that could have offset all their losses if they had just been a little more patient.
I still find myself tending to let losses run rather than doing what I know is right and getting out of the position to reevaluate. As I mentioned in Chapter 1, it’s all too common for traders to talk their book, or live in denial, hoping against hope that the market will turn their way. This is almost guaranteeing that it won’t. Traders in the midst of losing tend to live on the misplaced hope that the market will retrace and then let them break even. Instead, this mentality actually leads to the opposite and creates even bigger losses. The markets can be cruel, and they seldom come back or retrace to let you off the hook. All of this can be avoided or dealt with quite easily. Simply use discipline and, more important, predetermined stop orders to prevent your losses from closing your account. Equally important is to have a plan to take profits at a very specific level and stick to it.
Often new pit traders in particular will get hit hard and then become overly cautious. They resort to taking small profits even though those miniscule gains might have turned into a large profit that could have offset all their losses if they had just been a little more patient.
I still find myself tending to let losses run rather than doing what I know is right and getting out of the position to reevaluate. As I mentioned in Chapter 1, it’s all too common for traders to talk their book, or live in denial, hoping against hope that the market will turn their way. This is almost guaranteeing that it won’t. Traders in the midst of losing tend to live on the misplaced hope that the market will retrace and then let them break even. Instead, this mentality actually leads to the opposite and creates even bigger losses. The markets can be cruel, and they seldom come back or retrace to let you off the hook. All of this can be avoided or dealt with quite easily. Simply use discipline and, more important, predetermined stop orders to prevent your losses from closing your account. Equally important is to have a plan to take profits at a very specific level and stick to it.
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