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Fear of loss leading to cutting winners way too early..
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Fear of loss leading to cutting winners way too early..

  #1 (permalink)
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Fear of loss leading to cutting winners way too early..

Fear of losing is driving me to cut winning trades way too early, any suggestions or reading materials on how to overcome this?

I am taking great trades with reasonable profit targets (which I usually sit and watch be reached after I get out too early)... Just can't seem to get rid of this fear of losing.

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  #3 (permalink)
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I think most of us have dealt with this early on in trading.
You have to force yourself to hold, wait, and watch.
It's one of the keys to trading; Discipline.
I didn't read anything or do something special to overcome it.
I just did it.

Psychology > Strategy ≥ Money
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r3algood View Post
Fear of losing is driving me to cut winning trades way too early, any suggestions or reading materials on how to overcome this?

I am taking great trades with reasonable profit targets (which I usually sit and watch be reached after I get out too early)... Just can't seem to get rid of this fear of losing.

Do you have stats and probabilities on your targets? Do you know why you should hold? I think that is really the key. Once you train your mind in probabilities you would rather take a loss than skew them by getting out early. Very important not to trade on a trade by trade basis but looking at your overall system. Losses are normal part of trading. If they are normal why should they hurt? I typically do not use break evens and many times get within 1 tick of target then get a reversal for a loss. But does not bother me at all because I know my expected probabilities over long term so I rest well.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."

Last edited by liquidcci; July 31st, 2012 at 07:12 PM.
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r3algood View Post
Fear of losing is driving me to cut winning trades way too early, any suggestions or reading materials on how to overcome this?

I am taking great trades with reasonable profit targets (which I usually sit and watch be reached after I get out too early)... Just can't seem to get rid of this fear of losing.

You have to define what method you are using to set your targets. If you don't have a strict definition on where to set targets, you will always have that fear, because no matter where you get out, the market will eventually go further. If you define your targets properly based on the defined characteristics of your method, then it will be easier to hold to your targets. My trading is largely based on 2:1 risk/reward, if my stop is 10 ticks and my target is 20 ticks, once I hit my target, I don't care if the market moves another 200 ticks in the same direction, because my defined goal has been met, I have no regret, the method has proven itself, I wait for the next trade.

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r3algood View Post
Fear of losing is driving me to cut winning trades way too early, any suggestions or reading materials on how to overcome this?

I am taking great trades with reasonable profit targets (which I usually sit and watch be reached after I get out too early)... Just can't seem to get rid of this fear of losing.

First, accept that you will not always get out at the high or low. In other words, usually you will leave some profit on the table, whether it's exiting too early, or too late. Accept it.

Second, after trading for a sufficient period of time and knowing your market like the back of your hand, honestly ask yourself, is this move really likely to continue? Not "will it continue?" but, based on knowing your market well, "is it likely to continue?" And, if you determine based on your discretion that it really is likely to continue, then why the hell would you limit your profit? You have entered the trade, you have taken the risk, and now the market is moving in your favor. Let the market pay you for your work. Doing otherwise is like telling an employer that it's okay if they don't pay you what you earned this week--it's not okay, and you have earned the right to allow the market to pay you, so let it work FOR you.

You should probably have an idea of where you want to flatten or take profits, but you certainly do not need a predefined, fixed target, nor do you need some systematic way to determine this. You can have this, but you do not need it. If you truly are cutting profits out of fear, then framing it as I mentioned in the above paragraph may help. If you are cutting profits because you do not know any better, then you simply need to improve as a trader in your read of the market.

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  #7 (permalink)
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Nice question and one you will get various answers to. I can only answer from my own experience. I am not yet disciplined enough to take view on an exit as a trade develops so I set a profit target as soon as I enter. This is good for me as I then only care about what happens from 'here to here', rather than expecting a trade to go to the moon.

At first I just could not do it - sit there and watch it get close and reverse. So I removed the conflict and walked away from then screen after setting a trade (with a stop and profit order sat in the market) and went did something else. Walking the dog was a good option.

It helped that I had coded and backtested the key elements of my system so that had the results to hand that said "do this and you should make money". In other words I trusted the system now just had to work on trusting myself.

I realised if I could not train myself to do this key part of trading I would never develop as a trader and that would mean eventually throwing in the towel. No way! this is too important and I enjoy it too much to run that risk. In other words a gun to my head moment, "if you can't do this you will not succeed".

Thinking in probabilities, as has been mentioned above, is a great help. How do you do this? I am getting to know my new friend probability by becoming a student of him. As he can either work for me or against me I want to know all about him. I now try to think in samples of trades, not 'this' trade, and in doing that any individual trade can't hurt me. If it can't hurt me what does it matter what it does?

Practise holding to target as a distinct discipline. Market replay (if you use Ninjatrader) is good. Just sit there and set trades as per your method and hold 'em. I use to re-run particular days and set trades that I knew before hand would hit target just to get use to the feeling and try to hard wire my brain to 'wait'.

I also have a printed part of my trade cards (use one for each trade) that asks "Hold To Profit Target Y/N Explain..." So if I don't do this I have to write out why. As I have the trade card to hand during the trade this helps me rember the rule and (hopefully) stick to it.

I read numerous trading psychology authors that identify what lies behind this. Mark Douglas and Brett Steenbarger are a couple that come to mind.

All of this work is really trying to get me to a place where it all comes 'naturally'. For me that is a way off so I use various tactics and tools to help. Not there yet but making progress!

know thyself
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Massive l View Post
Discipline.
I didn't read anything or do something special to overcome it.
I just did it.

Your thoughts here have really struck home with me, there are no short cuts or easy ways to find success in trading or anything in life for that matter.. You just have to do it and do it with discipline.

Thank you for your post Massive l

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liquidcci View Post
Do you have stats and probabilities on your targets? Do you know why you should hold? I think that is really the key.

I do not have stats and probabilities on my targets. I realize more and more how important this and the absolute necessity of doing the proper leg work to have the probabilities on my side.

Liquidcci, I want to begin keeping stats on my trading, any ideas or advice on where to start?

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  #10 (permalink)
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monpere View Post
You have to define what method you are using to set your targets. If you don't have a strict definition on where to set targets, you will always have that fear, because no matter where you get out, the market will eventually go further.

The more I read through this thread the more I see how important it is to have a defined methodology.

Thank you for your reply here monpere.

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