How to overcome the inability to accept small losses when wrong on trades?

[Frederick Foresight]

I've read both the Mark Douglas books multiple times, read Psycho-Cybernetics and spend lots of time thinking about this stuff but still last week I got blown out on a stupid trade where I couldn't accept that my entry was wrong! This was after a month and a half of daily trading on GC / CL.

You may have read them, but you did not internalize them. Personally, I've never been able to read Douglas's first book cover to cover. It was like riding a bicycle too slowly; I kept falling (asleep). However, I did manage to read all of his second book. I may not have liked everything he wrote, but there were some nuggets worth savoring. That's why I made an effort to watch the videos posted in this thread:

https://www.elitetrader.com/et/threads/mark-douglas-how-to-think-like-a-professional-trader.319792/

You should take the time to watch the 4th video in the first post. It's almost 2 hours long, but it sounds like you need it. And then maybe watch it again.

 

[Spooz Top 2]

Like I always reinforce, the entry , imho, Is the most critical & important component of a trade as it literally dictates the entire process & dictates whether you win or lose that particular set up.

Refine.. I mean truly refine your intestinal fortitude to be incredibly selective on your entry & do not waver... let PA come to you as 8 out of 10 x it will... Once your Entry is refined, the remainder of your entire equation/ trade is now in balance.. eg; Proper / favorable RR, Stop, profit target, trail stop, etc.

Invert... truly invert & visualize inverting your thinking to accept your initial stop as a positive not a negative.. Capital preservation is King... If your entry is sloppy then the entire trade/ setup is sloppy .. as long as you are on point with entry, the stop will be on point & correct.. accept it as insurance to preserve your most important asset... Cash!

 

[Frederick Foresight]

Like I always reinforce, the entry , imho, Is the most critical & important component of a trade as it literally dictates the entire process & dictates whether you win or lose that particular set up.

Refine.. I mean truly refine your intestinal fortitude to be incredibly selective on your entry & do not waver... let PA come to you as 8 out of 10 x it will... Once your Entry is refined, the remainder of your entire equation/ trade is now in balance.. eg; Proper / favorable RR, Stop, profit target, trail stop, etc.

Invert... truly invert & visualize inverting your thinking to accept your initial stop as a positive not a negative.. Capital preservation is King... If your entry is sloppy then the entire trade/ setup is sloppy .. as long as you are on point with entry, the stop will be on point & correct.. accept it as insurance to preserve your most important asset... Cash!

Good post. A good entry makes the rest of the trading process that much smoother, regardless of outcome. Chaos theory focuses on the behavior of dynamical systems that are highly sensitive to initial conditions. I'm not an advanced math guy by any stretch, but I do see the value of focusing on good initial conditions. A good entry goes a long way.

 

[tiddlywinks]

Like I always reinforce, the entry , imho, Is the most critical & important component of a trade as it literally dictates the entire process & dictates whether you win or lose that particular set up.

Refine.. I mean truly refine your intestinal fortitude to be incredibly selective on your entry & do not waver... let PA come to you as 8 out of 10 x it will... Once your Entry is refined, the remainder of your entire equation/ trade is now in balance.. eg; Proper / favorable RR, Stop, profit target, trail stop, etc.

Invert... truly invert & visualize inverting your thinking to accept your initial stop as a positive not a negative.. Capital preservation is King... If your entry is sloppy then the entire trade/ setup is sloppy .. as long as you are on point with entry, the stop will be on point & correct.. accept it as insurance to preserve your most important asset... Cash!

@Spooz Top 2

Thank you for the persuasive and thought provoking post. Myself, I operate from the "exit" camp belief. Your post, coupled with a post by a different poster in the money management is the only edge thread stating money management is not a method or strategy, which is true, has me re-thinking my stance. Thank you.

 

[qxr1011]

I can imagine that this is a common enough issue for discretionary traders.

only for those who does not have clear, defined rules

that is imho the source of your problem

has nothing to do with psychology

 

[traderslair]

I have a very simple fix for you, in the next trades for the next month you ONLY focus on how much you can maximum loose and you do not focus on how much you can win.

A trade that you exit at your systems stop loss is a good trade.

You are only going to trade 'good' trades in the next month.

 

[murray t turtle]

I am naturally a risk taker and enjoy extreme sports and being in danger. This may have something to do with it, but those activities I have control over the outcome. In trading I do not. This is a hard concept to accept.

%%
DO NOT try this @ home;keep doing that /blow thru several accounts you will learn.''Get my gead right'' you said?? HUH?? That slop IS part of your problem.

Average profit time is in years eug; full time professionals average 8% or 10% or 12% @ year. Some do better, but 80% fund managers dont beat SPY benchmark.HOPE this helps, helped me-wisdom is profitable to direct.

 

[mbondy]

I am having a very hard time with this psychological aspect of trading. I trade a discretionary chart reading method based on momentum reading and accumulation / distribution chart patterns. Been studying the method / charts for close to 10 months now and there is definitely an edge there in my ability to foresee possible moves before they happen. It's not perfect, and I get confused between time frames still but it is a method with an edge.

The problem is that when I start trading with leverage on full size futures contracts I have a run of good trades and make some money but then as soon as I get caught in a bad trade where I am wrong in my analysis or my entry is not that great, I just let my account bleed out and only bail when the pain is very bad, rather than when I knew I should have. There is some kind of psychological issue that makes me self sabotage for being wrong on the trade, like a punishment or something. I know I should bail but just cannot bring myself to doing it, then after I feel terrible shame for not being able to act.

I've read both the Mark Douglas books multiple times, read Psycho-Cybernetics and spend lots of time thinking about this stuff but still last week I got blown out on a stupid trade where I couldn't accept that my entry was wrong! This was after a month and a half of daily trading on GC / CL.

I can imagine that this is a common enough issue for discretionary traders. I am getting tired of blowing out accounts or getting margin calls. I don't want to give up on trading but I cannot seem to learn this very important risk management lesson for some reason.

It's frustrating to have to keep funding my account out of my savings. I have enough to keep doing this for a long time but still it is not an ideal situation obviously. This is a lesson that I must learn NOW before I do even more damage to myself financially and emotionally.

Has anyone that had this issue been able to over come it? How long did it take? What path did you take to get your head right?

Do you believe that you deserve to win?

 

[kmiklas]

Not proud of this, but one week I made some errors and suffered some heavy losses; 3% per day two of those days. It hurt so much that I crawled into bed at market close and curled up into a ball.

I realized that this could not continue, so the next week, I resolved to be very clear about how much loss I could handle emotionally, and get out when I hit that limit.

I always struggled mightily with being a "non-emotional" trader.

 

[lawrence-lugar]

Not proud of this,
but one week I made some errors and suffered some heavy losses; 3% per day two of those days

It hurt so much that I crawled into bed at market close and curled up into a ball

3% per day is considered "heavy losses" to you...I've done 10X that. -- But to be fair, I've had much greater gains as well.
And I always crawl into bed and curl up like a ball when I realize how old of a virgin I am.

Happy New Year 2018, kmiklas -- Many Happy returns. Good trading and good skill and good mind and good wisdom and good fortune and good tactics and good strategy and good execution and good psychology and good calmness,