I just watched a video and something clicked on the issue of taking profits early.
First let's look at why I (and many others) have this psychological issue of taking profit early...
1)
Fear of being wrong and to end the
pain of not knowing what will happen next.
2) Feeding the
greed with quick profit to gain temporary
pleasure.
I have known of and clearly defined my above issues some time ago, but breaking down your psyche and rebuilding is a difficult task to do by yourself. I still have some work to do myself, but I am getting better as I practice and focus on the below facts. Maybe they can help you also?
1) Focus on remembering that we can't possibly know whats coming next and just to use your edge and execute.
We have back tested and clearly defined the edge to prove it valid and profitable, now it's time to use the edge to make money through consistent execution. Fully embracing the risk and truly believing we don't need to know what's next should remove the fear and pain
we create from issue 1.
2) Then think back to all the times we have taken $30 early to feed the greed, only to realize when it's too late that the move was worth exponentially more. :-\ Had we just executed the edge those few runner trades would have more than made up for the stop outs and we would be making great money. It's not small profit often that will make us net positive, rather just one good move caught and executed on could make a traders week, month or even make the year. The short term pleasure turns to negativity when you realize you are not executing and leaving
$$$ on the table, costing you net profitability!
There's a cycle in place stemming back to the values we were raised to believe in. In the market these values are incorrect and they need to be broken in order to succeed. I will continue to work this out and I will become a successful trader.
To my point about the speaker in the video, something he said made me think...
Don't look at profit as something that causes emotions, look at it as a risk free trade.
A trade in the green is a
risk free trade, all you have to do is manage it.
Good trading and Happy Easter,
MC