I recently had to dump a friend. The relationship stunk, neither of us were getting anything out of it and that had always been the case. We ran in some of the same circles so we kept bumping into each other. It was volatile to say the least and we were pushed to our limits. As it started to deteriorate egos got even big. Ego and emotion are a deadly combination. When it ended and how much damage was the only unwritten part.
That course of events is the same way a bad trade develops. You get in a trade that you know is bad and you are right. As the trade is proving you right, you don’t do the right thing and click to get out. As the trade takes more from you, you want more in return. The only way you can possibly get something back is to continue at it. The more it goes against you the more emotional you get. The more your ego comes into play, the more you think you can change it. Then the questions come. Why did I break my rules? How long is it going to take to make back this mistake? At this point it is not a question of if you are going to lose but how much.
Losing the battle to win the war is an important concept to understand when losing. The longer you are in a losing trade, one that you know was doomed from the beginning, the longer you have to wait to look for the next winning trade. The longer you wait to exit the more it takes from you, monetarily and psychologically. Give the market what it wants, your money, and move on. There are plenty more coming. Not all trades are bad but almost all bad trades stay bad. The one time it turns good is what you will more easily remember. That is even worst. If the trade is bad, get out as soon as possible or don’t take it in the first place. Never let it get past your comfort zone of risk.
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