Trading Wisdom 03: Exiting Losers to Maintain Objectivity
“The more you lose in a trade, the less objective you become. Exiting a losing trade quickly clears your head and restores your objectivity. After a breather, you might put the same trade back on if you can intellectually justify it, but you have to constantly remind yourself that there’s a myriad of opportunities in the marketplace. By preserving your capital through the use of a stop, you make it possible to wait patiently for a high-probability trade with a low-risk entry point.”
- Marty Schwartz, Pit Bull
JS Comment:
How quickly do you exit your losing trades?
Do you lose objectivity when the market goes against you?
Do you use time stops as well as price stops? What is your optimal cut time — based on analysis of past trades, that statistical point at which “if it hasn’t worked by now, it’s probably not going to work at all?”
If you experimented with cutting losses even faster, what might happen?
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