Trading Psychology: Cutting Winning Trades Short

Rahul, an experienced day trader,and below we will discuss psychology behind Cutting Winning Trades Short.

Rahul took a trade in Reliance Capital based on simple Price action where Price is breaking multiple support on an Hourly Chart.  Let me take you through and Emotional Journey which every trader have/had experienced.

Rahul saw on the hourly chart that a multiday support on Hourly chart was breaking with volumes.

RahulI was very patient and waited for the low volume pullback and test of above breakdown zone as marked in below chart. This occurred, and he knew that the market was now in a position to turn. The pullback was over and we can see decent correction.

Rahul had a great entry and he knew profitable trade is round the corner.

So everything was looking good. Rahul  felt pretty calm, knowing that he has a trading plan and executing the trade as per the plan.

Reliance Capital  started to fall, just as he anticipated. But then it started.

  • I think I noticed tension first. Rahul’s body became tight, muscles tense.
  • Rahul’s leg started twitching like a sewing machine, you know, moving up and down on its own. He felt very uncomfortable.
  • Rahul was scared, really, He did not want to have another loss.

Rahul’s trade was in profit, and Mind Started playing game with him.

“What if this goes against me? I mean, how many times have I been wrong and lost money? Here I’m in profit, why not book it ?

This is what Rahul’s Mind  was telling
“Rahul, you are going to have a loss if you aren’t careful. Do the right thing, take your profits. Don’t be a fool and let them slip away.”

Then it got worse, really bad.

Reliance Capital  started to rally a bit. All Rahul could see was price going against him.

  • He has Butterfly in stomach felt queasy.
  • Fear of Loss was gripping him
  • His mind was screaming at me by this point. “Take the trade off ! Take the profits you’ve got! Hurry up, before it’s too late!”

So He closed the trade.

The Reliance Capital moved up a 2-3 points  higher and I started to feel good. In fact, Rahul was relieved to have saved my profits.

His mind was telling me, “Nice job!”All the tension was draining away.

But then it happened. The Reliance Capital started falling, and it fell with a vengeance. Rahul’s trade was unfolding as he had planned, but he was no longer in it.

Reliance Capital  fell, and fell, and fell. It closed on the low for the day and continued falling the next day.

Rahul was depressed; I mean now I felt really bad. His mind now told me that “I’ll never be a good trader,” that I was “stupid for taking the trade off ; this is what I had planned for. Why did I do that?” it said.

“Can’t I ever learn to trade my plan? I’m a failure when it comes to trading, I ought to just give it up and go back to my old job.” That’s what my mind was telling me.

I hope most of traders reading this would have gone through he same emotional Journey and this can be learned and you can ride the trade using proper coaching on Psychology of Mind.

We are not saying the mind is your enemy, as in many circumstances it is extremely helpful, but we need to know that the mind is not always our friend. We need to learn to defuse and gain some distance on what the mind is saying so as to differentiate between when the mind is being helpful and when it is likely to cause us and our trading to suffer.

Leave a Reply