7 Trading PSYCHOLOGY & DISCIPLINE Rules To Deal With Losses (The Winning Mindset of a Trader) – New Trader U

August 6, 2022 by No Comments

All traders have both wins and losses regardless of their strategy and system. Much like in sports traders don’t succeed on every trade just like baseball players don’t hit every pitch and basketball players don’t sink every basket. Trading is a game of win rate and positive expectancy through bigger wins than losses on average. New traders are surprised at the emotions that become involved with trading real money that was not present during system development. How you manage your psychology and discipline in trading will determine your success even after you have a system with an edge.

Here are seven key trading psychology rules to help you manage your emotions during your losing trades and maintain discipline.

1. Never let a losing day cost you more than your average winning day.

Your winning days should be bigger than your losing days. A key to getting and staying profitable is keeping your losses small and not allowing them to grow out of hand and become bigger than your wins. You can think of your risk/reward ratio in time as well as dollars and you should spend more time in your winning trades than losing trades. A losing day should not be bigger than an average winning day if you’re using stop losses and proper position sizing.

2. Quantify your stop loss level before you enter a trade.

You must know where you’re getting out of a trade before you ever get in. You must define the price level where your trade should not go if the trade is correct. Once that level is reached you must accept the loss to keep it small. Asking other people what you should do in a losing trade is a sign you have no trading plan. Quantify your risk at the start to define your risk/reward ratio.

3. Don’t engage in revenge trading.

Revenge trading is the irrational desire to win back your losses from the same market, chart and stock that you lost money in.

Revenge trading is commonly triggered by the ego feeling beaten by a stock and wanting to get even with the chart by making their losses back in new profits. A trader can become obsessed with making the money back on the same chart that they lost …….

Source: https://www.newtraderu.com/2022/08/05/7-trading-psychology-discipline-rules-to-deal-with-losses-the-winning-mindset-of-a-trader/

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