Mind Over Markets

Why Holding Winning Trades is So Difficult (How to Fix It)

Feb 15, 2024

42:33

Episode Summary: Why Holding Winning Trades is So Difficult (10 Steps to Fix)

In this insightful episode, we delve into the complex psychology behind one of the trading industry's most echoed mantras: "Run your winners and cut your losses." While this advice may seem straightforward, the reality of implementing it is anything but simple, especially for those new to trading or struggling to turn a profit. Our discussion kicks off by exploring why holding onto trades is inherently challenging, even for professional traders, who focus on the present rather than predicting the future with zero certainty. We uncover the primal psychology driving our difficulty in letting go of trades, linking it to our instinctual need for security and survival. This subconscious directive, honed over thousands of years, significantly influences our trading decisions, often leading to stress and irrational choices when faced with the perceived risk of a trade. The episode then shifts towards practical strategies to overcome this primal fear. We emphasize the importance of maintaining an active source of income outside trading to alleviate survival pressures. By breaking the association of trading with survival risk, traders can approach the market more rationally. We recommend starting with the smallest position sizes, focusing on modest wins, and gradually extending the duration of profitable trades as confidence and experience grow. Moreover, we discuss the value of backtesting and creating mental reset anchors, such as meditation or engaging in relaxing activities, to help manage emotional responses during trading. Building a long-term investment strategy is also highlighted as a way to mitigate survival fears over time. Acknowledging the inconvenient truth that the market's next move is inherently unpredictable, we encourage traders to embrace this uncertainty as a normal part of trading. Personal development and expanding one’s mindset are underscored as crucial for growing wealth consciousness and achieving trading success. Concluding the episode, we reiterate that while the concept of running winners and cutting losses may sound simple, the emotional and psychological hurdles make it a complex skill to master. However, with determination, patience, and the right strategies, traders can learn to navigate these challenges, transforming their trading journey from a battle for survival into a path towards financial freedom. Get out there and hunt!