I have a personal rule: Walk away after two losses per day.
Not that I have been able to follow it often, to be honest. I’ve broken the rule many times. I always think one of the following things to myself:
- “I’ve been really unlucky today. I’ll just do one more trade to get back on track.”
- “Maybe I’ll just jump in here for a quick profit – even though it does not fit my strategy to a tee – just to feel better about myself.”
- “I just want to get ONE win today. Reduce my deficit by a bit. Then I’ll log off.”
- “I know I can do this. I’m better than this!”
It took me a long time to learn to walk away after two losses in a day.
It sounds like an easy rule, but for me it is soooo hard to do.
I’ve only recently been able to walk away after my first two trades were BOTH losses.
It has to do with ego. It has to do with our repulsion at ending the day red. It has to do with our desire to make at least some profit every day (which is impossible, by the way). It has to do with our need for validation, to know that we haven’t lost our trading mojo. It has to do with that deep feeling of unfulfillment at making a loss.
But trust me, in the long run you will lose a whole lot less by capping your losing trades to just two a day (or however many you feel is a good cap for yourself).
Losses are inevitable. It’s how you handle your losses that make or break you as a day trader.