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The real damage is psychological, not financial. by lance beggs

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Super Contributor
The real damage done by taking a large loss is not necessarily the financial damage, but rather the psychological damage. Holding a loss past the stops digs a hole that psychologically is very hard to get out of. The real damage done by exiting a trade for a small profit and then watching it blast off without you, to what could have been the trade of your life, is not financial - lost opportunity didn‟t cost you any money. Rather, the real damage is psychological. The damage through watching a profitable trade turn around and go right through breakeven to exit at the maximum stop is not financial, but psychological. We are human, so single trade errors will happen. However, the worst mistake of all is allowing poor money or risk management to continue beyond that one trade, eroding our capital and placing us into a large drawdown. The psychological damage here is often overwhelming, and is what will take many novice traders right out of this game.
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Frequent Contributor
Well said, thanks for posting it asylum. I agree that oneself is one's worst enemy! And what is the best way to avoid making the same mistake again and again? Are there any techniques known out there that may help one, something like "how to memorize the numbers, faces or names". Any suggestion or contributions (beside the usual "google it!")?
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Just look in the mirror BEFORE YOU TRADE in the morning.A BIG mirror. So you can see the enemy,clearly.Then, check your pulse-rate as you sit down to do a trade.Excited ? If so.....please get up because Stupid's about to visit.If not,excellent.Let's continue.Thirdly,Do you have the money to back your bet 5x = Position-sizing.And finally,weather permitting...trade naked.I do.
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Regular Contributor
I've released a few dead dogs (no rats!) over the last few weeks, and the emotional release provided by getting rid of those high loss shares - priceless. Watching the portfolio gain do a sudden jump, not having to stare at those one or two massive negative numbers brought on by early brainless trading - priceless. Go on liberate yourself, and start letting them go!
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Regular Contributor
Well said Gareth. After trading my home (haphazard) way the past 2 years, I moved to a mechanical system using a boughtout package. As part of creating a "new" portfolio on the system, I had to sell my short-term trades turned long-term loss keepers and so realised a loss of several thousand. As you say, it does free you, and least now you can see your money actively working without having to wait and wonder when will those shares get back to reasonable levels. Lesson - have your stops in place and stick to them! Gee - I can even talk about those bad trades now....
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Regular Contributor
Well said Gareth. After trading my home (haphazard) way the past 2 years, I moved to a mechanical system using a boughtout package. As part of creating a "new" portfolio on the system, I had to sell my short-term trades turned long-term loss keepers and so realised a loss of several thousand. As you say, it does free you, and least now you can see your money actively working without having to wait and wonder when will those shares get back to reasonable levels. Lesson - have your stops in place and stick to them! Gee - I can even talk about those bad trades now....
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Super Contributor
after my last trade where i lost R700K, it is financial as well
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Regular Contributor
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