Taking profits early and not letting your profits run was another problem for me. Dont get me wrong. There is nothing wrong with taking profits instead of leaving it on the table but it must be done in a logical manner and not based totally on emotions.
This one was a bit more difficult to battle. What I analysed as I was reading ‘Trading in the zone’ ( just finished the book yesterday ) was that it has to do with accepting risk and accepting the fact that we can never know the outcome of a trade as every trade that you put on, even though the environment looks the same, is unique and anything can happen.
Like Andrew once said in the room ‘ Thinking in probabilities is not the same as Trading with a probabilistic mindset . A lot of times we think putting a stop loss is accepting risk but actually emotionally we are not. So again my mind creates a movie . I started with an experiment. Trading is Fishing. In fishing you have to buy the bait ( which you usually don’t bring back for your wife to cook but …. ). It is already accepted as a risk to lose the bait, the hook, some fishing line but not the fishing rod.
Once you lose the fishing rod it’s game over ( like if you blow up your trading account ). So it’s better to lose the fish than to risk losing your rod. To test this, I think of fishing just after I get into a trade. The candles are the fish and I imagine the candle biting my hook and ‘the games a foot ‘ ( as Sherlock Holmes used to say ). To me the bait is gone ( it is a cost of fishing). I don’t even think about the loss. My entire focus was ‘Will I get this fish’. My imagination got a bit real and everytime the candle move away from my target, I keep my line tight and when it moved a few pips towards me ( I shorted ) , I reel in some line so that the tension remain tight. Long story short, it was too realistic as prices keep moving towards and away from me, I got tired pulling the rod and went out for a coffee instead. But it was realllllly fun. There was no negative emotions, no fear of loss, and the only thing on my mind was ‘will I land this fish or not ( reach my target ).
I know in trading you should trail your stop loss or get out of a trade if you find the probabilities are not to your favour anymore. But for me it was an exercise to shift and control my emotions and not let the fear of loss affect my trading decision. Fishing is great as we already bring a lot of spare hooks, line and bait already accepting the fact that losing some of them is part of fishing . In fact, it would be weird if we lost nothing. But fishing was very tiring and I usually use another picture which is like a business. We throw out advertisement and already took it as a loss and a cost to business. The only thing in our minds once the advertisement is out is ‘ will we get some or a lot of sales’.
I am still not sure what Mark Douglas mean by accepting risk but this blog is about how I fight my self sabotage. I also used Jessca Alba to …..hmmm maybe another day on this one….