Cutting Your Losses - Trading Rules to Live By [ Ссылка ] If you've enjoyed this video, please click the like button below and share it with your friends and remember to SUBSCRIBE!
It's been mentioned before, and the old adage "Cut your losses and let your winners run" has a lot of truth. Some would argue that letting your winners run is not always the right policy, but almost without exception it is always correct to cut your losses.
For some reason this is a very difficult lesson for novice traders to learn. It goes against your human instincts, and that is why it is hard. You see, what is your first thought if you have carefully studied and prepared a trade, taken a position, and then the market runs against you? Your first thought is that you have done something wrong, that you must have misjudged something or misread an indicator.
The last thing you want to do in this situation, psychologically, is to close the trade and accept your loss, as this feels like a failure and we all want to avoid failure. If you keep the trade open and hope for it to turn around, then at least you don't have to feel that sense of failure immediately, and there is a slight chance that you won't have to feel it at all. These are instincts which work against you.
Once you have identified that the trade is losing, then you should not cut it any slack but simply close it and go on to the next trade. The market does not care what you think it "should" do, but simply gives you the playground for you to make the best of it. If you do not cut your losses swiftly every time, then in a short time you will not have sufficient funds for trading any more.
There is an additional reason why you need to do this, just as professional traders do. Think about it in these terms. You and many other traders thought the price was going up, bought into the position, and then found that the price went down. Those traders who are experienced and operating professionally will see this, and will immediately cut their losses, selling the position. What you think will happen if you hang on, hoping for that turnaround?
The price will be affected by supply and demand. The professional traders sell quickly, which increases the supply and reduces the demand. The net effect of this is to reduce the price further. If you are sitting there hoping that the price will turn around, the odds are that you will see exactly the opposite effect because of the actions of the professionals.
The feeling of failure or being wrong is one that every trader has to deal with. You need to learn to ignore this human emotion, and realize that you do not have to carry blame for every trade that goes the wrong way. If you made the trade in accordance with your strategy, and your strategy is sound, then you should congratulate yourself for sticking with your plan regardless of the outcome. Simply learn to accept that trading is a percentage game, and that you will have both winners and losers.
