Over my break I’ve had time to think about my trading, and came to the conclusion that my highest risk is trading soon after a trade, that [B]was[/B] my Achilles heal, it will now be solved by a simple rule saying [B]no[/B].
Sometimes you enter a trade get stopped out and convinced that I had analysed the market correctly I would enter at around where my stop loss would be, or something in that kind of sense, thinking it’s just going to go a little further before it moves. Sometimes it does, but the tricky thing to accept is that over the long run, just watching those trades go after you have been stopped out will avoid you getting into hot water.
As soon as that trade is closed out, your judgment is impaired, this is fact, well more or less I saw a study of the process on a BBC documentary so it must be true Shame I can’t remember what it was, but that’s the idea anyway.
So for me based on that is one BIG rule to adhere to is NO sequential trades, and it’s probably a good idea for most of us, some of course will argue otherwise, and that’s great if it works for them you are better traders than I will ever be, I am going to accept my limitations.
Great rule to follow. A lot of traders go to the trader grave yard because of revenge trading. When I suffer a loss I don’t trade that pair again for 24 hours and before I do, I analyze. analyze and analyze. The only thing that comes out of a negative trade is information you get when you review, so that the nextime, you don’t make the same mistake.
Along the personality risk lines: The disposition effect in securities trading: an experimental analysis by Martin Weber and Colin F, 1988.
What makes one to stick to loosing trades and close winning trades short?
What makes a trader re-enter a similar position after loosing?
Brilliant post! I love that term, “revenge trading”. I always put a dollar figure on my loss and once the loss has occurred I simply don’t think about it.
In my mind every trade is a loosing trade. Learn to think that way it will feel like insurance policy, you pay tiny premiums and then one day you get a payout.
That’s an interesting way to put it! It makes a lot of sense though, you’re bound to take small controlled losses every now and then but you have to be ready to hop in those market opportunities because one of those could be the big winner.
The problem I had with revenge trading was that at the start I knew I was revenge trading, but until recently I’ve been revenge trading without realising it, the only way to know that you are not revenge trading is to leave it at least until the next day, well for me anyway.
Shame I can’t remember what it was, but that’s the idea anyway.