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Get nervous after earning money
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Get nervous after earning money

  #21 (permalink)
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tigertrader View Post
the inability to hold onto winning trades is very common with new traders and is commonly referred to in behavioral finance as the disposition effect which is also part of of kahneman and tversky's prospect theory. it is a risk-averse behavior that is the result of the conflict between the cognitive and emotional aspects that concern the way people organize their information. for example, if you were up $1000 on a trade and i told you that you stood a very good chance of making an additional $2000 on the trade, your cognitive reasoning would surely prompt you to hold onto the trade. of course, i couldn't guarantee that the market would keep on going, so your emotional side would probably overrule the decision. this is a classic case of myopic loss aversion. traders tend to frame every trade they make in isolation from all others, instead of framing the experience in an aggregated way- they look at each trade as a one-shot deal rather than one trade in a series of trades.


the solution to the problem begins with an awareness of the factors that distort judgement, developing an expected value mindset, understanding the role of time, and a focus on process over outcome.

traders are willing winners who occasionally lose, i.e., they risk their capital on trades where the odds are in their favor and subsequently have a positive expectation. they base their trades on observation, empirical testing, and/or actual trading experience. they occasionally get unlucky, and have losing streaks, but these traders incorporate that risk into the determination of the expectation. because their approach is reason-based rather than driven by emotion, they usually have disciplined programs for sizing their trades in order to get the maximum geometric growth of their capital given the characteristics of the return stream, and their tolerance for draw-downs.

one trade, one day, one week, one month, even one year does not make a career. so one trade whether a winner or loser should not matter in the overall scheme of things, as long as the trade was made for the right reasons. if it does matter, than your sizing is too large. so look at your trading from a long term perspective or a big picture point-of-view and your short term p&l will have less significance for you. frame your trades on an aggregated basis and not on an individual basis. Imagine making 10 trades a day, 5 days a week, 52 weeks a year, 250 days a year - that's 2500 trades in a year. As long as you are limiting your losses, and your winners are bigger than your losers, how is one losing trade or two or three losing trades, going to degrade your overall/ long term performance?


do not trade your p&l and do not focus on the outcome of your trades- focus on the process. making good short-term decisions/trades, managing the risk/ keeping draw-downs to manageable levels and occasionally turning short-term winning positions into longer ones.

Another post another nugget. @Carrerain4 @budfox

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  #22 (permalink)
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Limitless100 View Post
I wasn't trying to make it sound like you should only be chasing money wherever you can find it. What I am trying to make clear is that regardless of how often you can be "right" on an idea, if it doesn't end up making money, it is of no use.

I just don't want you to become one of the people who are obsessed with always being 100% correct, and through their obsession they get quite good at calling things and tell people about their great ideas leading others to make some money. Yet, through all these ideas, you never find it within you to follow your own advice!

Thank you! Sorry I misunderstood your idea

It's true, we cannot be right every time, I will try to not be obsessed with always correct idea...


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  #23 (permalink)
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Last edited by tigertrader; August 19th, 2014 at 04:03 PM.
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  #24 (permalink)
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Fear appears where confidence is weak.

First ask yourself the following honest questions and answer realistically, doesn't matter how emotionally hard the answers may be:

Do you have the true "edge" in your trading? Are you consistent when you trade on simulated account with no emotions involved? If the answer is "yes", can you realistically reproduce the same execution on live account (can be an issue in case of short-term, particularly scalping, methods/systems)?

If you objectively KNOW the answer to questions above is "SURE, YES!" and still have a fear, then your issue is purely mental/emotional and the discussion should continue around the topic of trading psychology.

If you are unsure about the answer or deep inside feel there's something you probably are not so sure about your trading, then it's a problem of knowledge, so you need to go back to the desk and re-define your strategy/tactics (or probably gain more knowledge).

Anyway, wish you all the best in this (obviously not easy) challenge!

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  #25 (permalink)
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I had a similar problem to the OP's back in the late 90's.

I took a huge hit, got the money back in a few months, and decided that I couldn't trade like that anymore.

I immediately took two weeks off, took a vacation, re-established a plan-of-attack, and decided to become a "grinder", or someone who is happy simply taking small bites out of the market, as opposed to having the aim of hitting a grand slam.

"Becoming a Grinder" meant that I would be trading far smaller, but it worked out in the end, and it was a comfortable transition.

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  #26 (permalink)
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Limitless100 View Post
I just don't want you to become one of the people who are obsessed with always being 100% correct, and through their obsession they get quite good at calling things and tell people about their great ideas leading others to make some money. Yet, through all these ideas, you never find it within you to follow your own advice!

Oh man, I still endure bouts of that ....... where I'll supply a bunch of opportunistic setups in great detail over on an online journal I keep, but I won't trade most of them. Every time I experience a stretch like that I keep asking myself what the hell is my problem. How hard is it to just take the damn trade!!

At the present time I'm working my way out of a big hole I dug myself from December thru February. I lost control at that time because of an unforeseen financial situation and started getting overly aggressive in my position sizing. Suffice to say it was a complete disaster. I had to back off for a little bit to get my head right. I even took on a side job. The silver lining is it forced me to get back to basics. 95% of my positions are back to 1,000 shares in equities ranging from $10 to $50. If I trade anything from $50-$100 it's generally 500-750 shares.

Suffice to say I'm better mentally now, but yet I still run into times where I'm being a little too passive in my approach. As I said before I'm almost back to even and I know that if I continue to chip away (even at a slow pace), I'm going to be green again soon. However, It still irks me to no end that I look back at a week like this and know I missed out on 3-4 plays, which would've grossed around $4,000. Combined risk based on stop losses would have been $1900.

I'm debating making a pledge to no longer post analysis on a stock unless I'm actually going to trade it. I've got to somehow hold myself accountable in letting the averages work themselves out. Continue to chip away at the false pretense of needing the trade to be right.


Last edited by Rock Sexton; August 29th, 2014 at 01:47 AM.
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  #27 (permalink)
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tshunhu View Post
Hello Everyone,

I began to be daily profitable since July. During July, I covered all the lose that I have done since the beginning of my trading.

I have a better strategy and discipline now, but I feel that I'm more nervous about losing money. I want to earn more but afraid to lose.

At the beginning stage, I was prepared to lose money due to my novice. Now with a positive profit on my account, I hate to lose. I become too cautious to miss good trade.

Does anyone had the same feeling or period? How did you deal with it?

Thank you!

I think you are too focused on being perfect on every trade. Losing trades are a fact of life but if you analyze them for the cause of the losses then those trades are still worthwhile. You cannot be afraid of mistakes, if you never make mistakes you are being too cautious in life. Just make sure that you have a plan to make sure you mitigate the losses as much as possible and don't make another one right away just as a response to break even.

Just remember that the most successful baseball hitters have a batting average of about .400...in other words they fail to get on base over half the time that they step up to the plate. Do you really think that they are thinking about failure when it is their turn at bat???

Accept your loses and analyze their reasons, if you really made a mistake understand it and resolve to correct that approach. Sometimes though the loss was beyond your control due to market conditions...nothing you can do about that...just dust yourself off and execute your plan and step up to the plate and keep your eye on the ball.

hahaha...love baseball...a simple game, full of complexities.

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  #28 (permalink)
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Rock Sexton View Post
Oh man, I still endure bouts of that ....... where I'll supply a bunch of opportunistic setups in great detail over on an online journal I keep, but I won't trade most of them. Every time I experience a stretch like that I keep asking myself what the hell is my problem. How hard is it to just take the damn trade!!

At the present time I'm working my way out of a big hole I dug myself from December thru February. I lost control at that time because of an unforeseen financial situation and started getting overly aggressive in my position sizing. Suffice to say it was a complete disaster. I had to back off for a little bit to get my head right. I even took on a side job. The silver lining is it forced me to get back to basics. 95% of my positions are back to 1,000 shares in equities ranging from $10 to $50. If I trade anything from $50-$100 it's generally 500-750 shares.

Suffice to say I'm better mentally now, but yet I still run into times where I'm being a little too passive in my approach. As I said before I'm almost back to even and I know that if I continue to chip away (even at a slow pace), I'm going to be green again soon. However, It still irks me to no end that I look back at a week like this and know I missed out on 3-4 plays, which would've grossed around $4,000. Combined risk based on stop losses would have been $1900.

I'm debating making a pledge to no longer post analysis on a stock unless I'm actually going to trade it. I've got to somehow hold myself accountable in letting the averages work themselves out. Continue to chip away at the false pretense of needing the trade to be right.

It's unfortunate. You will be able to come up with incredible ideas that end up being correct, yet you aren't reimbursed for your idea. Instead, you watch as your hypothesis is proved to be true and your bank account stays the same size!

It's sad but, many times failure is our key to great success. With your large set back in december/feb, you may have actually opened the door to incredible success for the future now. There is nothing wrong with needing conviction to place a trade, but we need to ensure we have confidence in ourselves first. Because without confidence in your own greatness it will be very difficult to trust your trading ideas when they come!

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  #29 (permalink)
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Limitless100 View Post
It's unfortunate. You will be able to come up with incredible ideas that end up being correct, yet you aren't reimbursed for your idea. Instead, you watch as your hypothesis is proved to be true and your bank account stays the same size!

It's sad but, many times failure is our key to great success. With your large set back in december/feb, you may have actually opened the door to incredible success for the future now. There is nothing wrong with needing conviction to place a trade, but we need to ensure we have confidence in ourselves first. Because without confidence in your own greatness it will be very difficult to trust your trading ideas when they come!

Ya that situation last December helped me find a better "comfort" zone for the capital I'm using and for my mentality. I let my financial situation and the influence of a money manager sway me into getting aggressive. This is a guy who trades big and admits to living with major discomfort every minute of the day. I just don't want to conduct myself like that. Can't imagine doing this for 30 years like he has feeling that way.

Keep in mind my comfort is on a singular trading level. When it comes to putting on multiple positions I still don't have the confidence I need yet. It's purely psychological too. I still think irrational thoughts like "Well I don't want to take another trade on in case it eats into profits of a trade I already have going." As I've inched my way closer to break even on the year you can see how that thought might fester a bit. It's ridiculous though. We as traders always have to take the next trade. Singular trades don't matter, only the net cumulative outcome does.

I won't lie, sometimes I get really upset that I'm putting out great analysis that others are benefiting from except I'm not in the way that I should be. It reminds me that it doesn't matter what the method is, it boils down to the mentality of the person implementing it. Still trying to find that zen level of confidence. I've got another job opportunity coming up and I'm hoping that the potential salary will ease my mind a little bit. I want to just focus on executing trades, not prioritizing outcomes.

Then maybe one day when I've got a nice chunk of reserves built up and the right head space, I can perhaps get back to trading as my primary source of income.


Last edited by Rock Sexton; August 31st, 2014 at 01:23 AM.
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  #30 (permalink)
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First thing first you need to embrace that losing is a part of trading. You cant avoid loses in trading. The reality is that once you place the trade you don't know if its going Win or Lose so don't stress yourself over something you can't control.

The only thing that you can control is when you enter and where you set your stop loss. Which leads me to my next piece of advice. You have determine what stop loss size is good for your psychology.

I was trading a system that had a stop loss of $400. The day I lost that much money in less than an hour I knew that I had to make some adjustments and tighten up my stops to suite my emotional/mental profile. I have now decreased my max stop loss all the way to $120 and I'm still earning a minimum of 2:1 on my trades.

Since I have decreased my stop loss to $120 I am now comfortable and am more tolerable when I have losses because I know my loss is'nt going to be a big loser. Of course this is relevant to account size. Some traders that have big bankroll do not see $400 as a big loss but for a person trading with 5k that is def a nice size loss.

If I were to keep that $400 stop loss I would blow my account pretty fast. Last but not least.

It is very important that you start thinking in probability. The sooner you understand that you need to focus on series of trades rather than "one trade" you will start to be relieved from the WIN / Loss mindset.

I highly recommend Trading In The Zone. That book was a huge contributor to changing my mindset.

One last tip. A habit that I recommend you start to develop is that habit of placing your stop loss as soon as your order is filled. Don't wait!

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