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.

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!

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!

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!

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!