This is the #1 problem for traders to turn profitable. There is even a name for it (heuristic risk).
Short explanation: over 90% of all humans are risk averse when they have money, and risk taking when they don't (the rest are pure gamblers).
This can be applied to any time frame, even the individual trade level. Think about it. When you are out of the money on a trade, but within your risk area, I bet you always wait to see what happens. But when you get some profit, and the mkt moves against you, bang, book those profits! You can never go broke booking profits right? WRONG, cause then your ave gain is smaller than your ave loss. Unless you are extremely accurate, you will bleed to death.
No simple answers. I usually book half my profits and let the rest run, but it depends on the trade. I also continuously remind myself that its just a #'s game in the end. Each INDIVIDUAL trade means nothing in the long run. I realize if I don't let em run, in the long run, I am toast.
Jay
Short explanation: over 90% of all humans are risk averse when they have money, and risk taking when they don't (the rest are pure gamblers).
This can be applied to any time frame, even the individual trade level. Think about it. When you are out of the money on a trade, but within your risk area, I bet you always wait to see what happens. But when you get some profit, and the mkt moves against you, bang, book those profits! You can never go broke booking profits right? WRONG, cause then your ave gain is smaller than your ave loss. Unless you are extremely accurate, you will bleed to death.
No simple answers. I usually book half my profits and let the rest run, but it depends on the trade. I also continuously remind myself that its just a #'s game in the end. Each INDIVIDUAL trade means nothing in the long run. I realize if I don't let em run, in the long run, I am toast.
Jay
