Ok, so I know the title sounds a little funky. But if you stop and think about it for a minute it makes a lot of sense. It is human of us to hold on to trades that go against us and hope that they will one day come back and we will either get out for break even or a tiny profit. At the other end of the spectrum we sell our winners too soon. I am completly guilty of this but am at least aware of it and am trying to fix this. As this method is completly ass backwards. You should be holding your winners and cutting your losers as quickly as possible.
Before I really got a risk managment system in place I would routinly let things trade against me and have no stop loss in place and would just pray and hope that it would eventually get back to break even. This is not to say that my system is perfect yet as there have been a few slip ups here and there, but nothing like before. Plus you can not expect to change habits over night. But I can certainly say that I have gotten much better at selling losers. But as I got better at selling my losers I noticed myself selling my positions that were working to offset those losses. What a physcholgical accounting mind fuck, right? This makes no sense what so ever. Well today after I cut my last long position I took a step back and had to fight with myself as to whether I should keep my short spreads on that are working and working well or sell them to offset the losses from a few of the longs I sold. This is a good example of the whole physcological dilema that many traders face.
This is when it hit me that I should be treating my winning positions like I use to treat my losing positions. I need to continue to let it run and do its thing. Nothing has changed in the market that is telling me to take the position off. Today I decided that in the long run it will be much more profitable to treat my winners like I use to treat my losers and let them ride.
No one ever said that trading was easy!
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