Dear all,
Please advise me on how I should control myself. I keep widening my stop loss (SL) when the market goes against me. I widen it with the hope that the market will be reversed at some point and I add up a new position(Averaging), But the market reverses sometimes. I end up blowing the account with my own hands… Please advise me on how to improve my psychology and get out of this trap I am in right now.
hi, what type of method do you use?
The market will most frequently go against you if your position is counter-trend. Take positions with the underlying trend.
Also, don’t buy at a high, don’t sell at a low.
Price will most frequently approach your stop-loss if the SL is very tight to the entry, not allowing for normal volatility plus the possibility of widening of spreads by the broker.
Never widen stops and never average down a losing position.
Use a pre-trade checklist for disciplined decisions, and never deviate from that plan.
Absolutely.
And in theory, that 1 sentence is all you need.
But it’s difficult to do, isn’t it?
It isn’t a psychological problem.
It just looks and feels like one.
That’s what normal people, without psychological problems, instinctively do when they don’t know with certainty, having independently verified it (after first learning how to independently verify statistical functions with a high confidence-level, which isn‘t easy), that their trading method has a proven edge.
Many or most of them don’t really quite understand what a proven edge is, let alone how to go about proving it.
And until they learn that, they’ll instinctively widen their stops and add to losers, because they’re trading on hope, not on the education they actually need.
Your trading method might have an edge. It might not. I don’t know. But here’s the real problem: YOU don’t know, either.
So naturally enough when something looks like it’s going badly, you follow the normal and understandable instincts of trying to improve it locally/quickly rather than relying on the collective confidence of statistical significance and taking small losses in the knowledge that bigger wins will outweigh them over time. Because you don’t actually have that knowledge.
Those instincts make you widen your stop-losses and add to losers.
You’re not alone.
But don’t let anyone tell you that you have a “psychological problem.”
I think the above information is gold, so treat it like gospel.
I will also add; don’t be afraid of losing, it’s a big part of this business. And a business is exactly how you need to treat it.
A business has expenses and overhead to run effectively, such as raw materials and payroll. Your losses are your expenses. Therefore, controlling your expenses should be your primary focus.
You will get eaten alive, the only people that survive are the market makers pushing around millions of dollars.
Theta is your friend, remember these words:
Options Lose Value Over Time: Options are decaying assets. The time value of an option decreases as the expiration date approaches. This concept is known as theta decay. Sellers of options benefit from this natural decay, as the passage of time generally works in their favor, reducing the price of the options they have sold.
Hi @adnansheikh, it’s common for beginner. Here is my advices.
When you put a position, you have to know the major trend. It can be found in Higher Time Frame (HTF). As others mentioned, you are using counter trend strategy. You are trying to catch a reversal, it’s the art of catching fallen knife. If you are a pro, you get the handle otherwise, you will bleed.
For example, you are trading M5 chart, better to look at H1 or H4 chart to find out what is the trend. If it’s uptrend, wait for correction happens in H1/H4 chart. The correction at H1/H4 will be a downtrend when you look at M5 chart. You may get the reversal on M5 base on SnR / indicator on H1/H4 chart.
When you have fixed your trading method, next find the statistics. Look for win rate and Reward Ratio (RR) by doing back testing. If the result is positive, means it makes money (either single setup / averaging), then you can forward test to. When you make position, just follow your predefined methodology. If you are so itchy to interfere with your methodology, ask your partner, wife, friends to tie you up on the chair after making position. 
Your psychology will get adjustment when you have experiences. It is also better if you trade using cent account. Most people get disturbed by trading standard account. 
Find a strategy which other traders have used and which they have found consistently profitable
Demo-trade the strategy to make sure you understand it.
Trade the strategy with tiny positions to prove that you can run it and make money.
Once you have done these things in sequence you will never want to sabotage your own trades again.
Stick to your stop loss to avoid emotional trading. Widening it and averaging down often leads to bigger losses. Focus on discipline and risk management. Practice on a demo account to build better habits.