Getting out of trades too early

Quote from NoDoji:

What's been imprinted on your psyche is 1) the relief you feel when your early exit saves you from a loss 20% of the time, and 2) the relief you feel when you extract some money from the market and are now free from that "mental torture".

So your bad habits have been associated with temporary relief from pain, but you're stuck with the pain of small profits (or possibly losses) over time. Whenever a bad habit brings momentary relief, we tend to keep doing it. Smokers reach for another cigarette, drinkers for another drink, junk food junkies for another cookie, despite the net negative result of these series' of momentary "pleasure".

Addicts must learn to sit with the discomfort of the craving until it subsides (it eventually does), and for a lasting recovery they must rout out the defects of thought and behavior that led to the addiction and send their egos to the back seat.

You've been unable to sit with the discomfort of normal price action and never give yourself the chance to imprint that amazing ("this seems unreal") feeling of realizing your with-plan profit targets that 80% of the time the market offers to you.

When you're in a trade, breathe deeply and slowly and fully accept the cost of the trade and the discomfort, knowing that over a series of trades the outcome will be far better than if you micro-manage each trade according to what you habitually think and how you feel.

I think developing this mindset is the toughest barrier to consistently profitable trading.
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You must write a book, NoDoji! :D
 
I ride winners all the way and add and trail stops, sometimes, many gnomes, my winners turn losers.only such times I hope I am not max pyramid.
 
NoDoji said:
What's been imprinted on your psyche is 1) the relief you feel when your early exit saves you from a loss 20% of the time, and 2) the relief you feel when you extract some money from the market and are now free from that "mental torture".

So your bad habits have been associated with temporary relief from pain, but you're stuck with the pain of small profits (or possibly losses) over time. Whenever a bad habit brings momentary relief, we tend to keep doing it. Smokers reach for another cigarette, drinkers for another drink, junk food junkies for another cookie, despite the net negative result of these series' of momentary "pleasure".

Addicts must learn to sit with the discomfort of the craving until it subsides (it eventually does), and for a lasting recovery they must rout out the defects of thought and behavior that led to the addiction and send their egos to the back seat.

You've been unable to sit with the discomfort of normal price action and never give yourself the chance to imprint that amazing ("this seems unreal") feeling of realizing your with-plan profit targets that 80% of the time the market offers to you.

When you're in a trade, breathe deeply and slowly and fully accept the cost of the trade and the discomfort, knowing that over a series of trades the outcome will be far better than if you micro-manage each trade according to what you habitually think and how you feel.

I think developing this mindset is the toughest barrier to consistently profitable trading.
More...

Very good post!

Something I do to make it easier to follow my trading rules is to look at my equity curve over time. Sometimes it ticks down a bit, but then recovers. As posted above, you have to feel comfortable with a loss and not get upset, but also not afraid to stay in a position if the predefined rules say so. In my experience, looking at the larger time frame of your equity curve will make it easier to hold on to your short term trading rules .
 
Dfernandes said:
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Thanks, but I think your offer has finished (1st March 2014 was Saturday) :D
 
NoDoji said:
What's been imprinted on your psyche is 1) the relief you feel when your early exit saves you from a loss 20% of the time, and 2) the relief you feel when you extract some money from the market and are now free from that "mental torture".

So your bad habits have been associated with temporary relief from pain, but you're stuck with the pain of small profits (or possibly losses) over time. Whenever a bad habit brings momentary relief, we tend to keep doing it. Smokers reach for another cigarette, drinkers for another drink, junk food junkies for another cookie, despite the net negative result of these series' of momentary "pleasure".

Addicts must learn to sit with the discomfort of the craving until it subsides (it eventually does), and for a lasting recovery they must rout out the defects of thought and behavior that led to the addiction and send their egos to the back seat.

You've been unable to sit with the discomfort of normal price action and never give yourself the chance to imprint that amazing ("this seems unreal") feeling of realizing your with-plan profit targets that 80% of the time the market offers to you.

When you're in a trade, breathe deeply and slowly and fully accept the cost of the trade and the discomfort, knowing that over a series of trades the outcome will be far better than if you micro-manage each trade according to what you habitually think and how you feel.

I think developing this mindset is the toughest barrier to consistently profitable trading.
More...

Great post, thanks for sharing, NoDoji.

What I like to add is reframing as a way to escape this compulsive behaviour of taking profits too early (often due to loss aversion).

After I have entered a trade I see only the potential loss which I like to avoid by trying to take control over the trade, which often means scratching the trade for some ticks even if it is still valid. The frame is: You are now in a trade and you have the control. This trade is dangerous, you are responsibel for not losing and securing any profit you might get. Therefore I see only the risk in form of a potential loss.

Reframing:
I like to see every trade I enter (with a valid setup in the right context) as a rare chance to take a profit in the market over the long run. But this chance is no free lunch. It costs me a potenial loss in the form of risk. I accept this risk and know I will make it as small as possible in the form of my SL. But I focus on the rare chance to take a profit. I will foster the trade as long as it is valid and I will minimize my risk as the market goes in my direction.

I also visualize the trade as a prey which I have caught. The prey now tries to escape (seeing some heat in my trade), but I will not let it go as long the rope holds (as long my SL will not cut it). I know I will not get every prey and sometimes I have to buy a new rope but I will not let it out just because I am afraid my rope could burst.
 
me1969 said:
Great post, thanks for sharing, NoDoji.

What I like to add is reframing as a way to escape this compulsive behaviour of taking profits too early (often due to loss aversion).

After I have entered a trade I see only the potential loss which I like to avoid by trying to take control over the trade, which often means scratching the trade for some ticks even if it is still valid. The frame is: You are now in a trade and you have the control. This trade is dangerous, you are responsibel for not losing and securing any profit you might get. Therefore I see only the risk in form of a potential loss.

Reframing:
I like to see every trade I enter (with a valid setup in the right context) as a rare chance to take a profit in the market over the long run. But this chance is no free lunch. It costs me a potenial loss in the form of risk. I accept this risk and know I will make it as small as possible in the form of my SL. But I focus on the rare chance to take a profit. I will foster the trade as long as it is valid and I will minimize my risk as the market goes in my direction.

I also visualize the trade as a prey which I have caught. The prey now tries to escape (seeing some heat in my trade), but I will not let it go as long the rope holds (as long my SL will not cut it). I know I will not get every prey and sometimes I have to buy a new rope but I will not let it out just because I am afraid my rope could burst.
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Beautiful! I too found/find myself thinking of the potential loss first (because it's always drilled into our heads to manage risk above all) and quickly reframe my thinking to focus on the net gains inherent in the plan, which is based on series' of trades, not individual trades.

I used to keep a copy of a typical spreadsheet analysis on my desk and look at it prior to the start of trading so I could remind myself that 80% of the profitable trades retrace at least a little bit after entry .
 
I have this problem.

The angel on my shoulder tells me this is just a normal phase that happens after a losing trader has finally become consistently profitable, and the next plateau will be obeying the calculated target or trend following sell signal.

The devil on the other shoulder constantly accuses me of gambling with money I should put in US Treasury bills, so I should never have been invested in the first place, and should get out before I lose everything.

My weak carnal mind reconciles this debate by following the buy setup and taking profits at the first sign of victory.

:eek:
 
me1969 said:
Great post, thanks for sharing, NoDoji.

What I like to add is reframing as a way to escape this compulsive behaviour of taking profits too early (often due to loss aversion).

After I have entered a trade I see only the potential loss which I like to avoid by trying to take control over the trade, which often means scratching the trade for some ticks even if it is still valid. The frame is: You are now in a trade and you have the control. This trade is dangerous, you are responsibel for not losing and securing any profit you might get. Therefore I see only the risk in form of a potential loss.

Reframing:
I like to see every trade I enter (with a valid setup in the right context) as a rare chance to take a profit in the market over the long run. But this chance is no free lunch. It costs me a potenial loss in the form of risk. I accept this risk and know I will make it as small as possible in the form of my SL. But I focus on the rare chance to take a profit. I will foster the trade as long as it is valid and I will minimize my risk as the market goes in my direction.

I also visualize the trade as a prey which I have caught. The prey now tries to escape (seeing some heat in my trade), but I will not let it go as long the rope holds (as long my SL will not cut it). I know I will not get every prey and sometimes I have to buy a new rope but I will not let it out just because I am afraid my rope could burst.
More...
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Wow, you look so uncomfortable trading.

For me, I can hold a position for days or weeks. I have a heart attack if I traded like that.
 
I have a definite stop and I can shift my stops to trail profit.

I can ride a profit into a loss, but I can ride a loss into a profit, so long my stops don't get hit.
 
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