Extract from 'The Disciplined Trader' by Mark Douglas
If you are in a losing trade, the market could be moving farther and farther away from your entry point, increasing your potential loss by the moment. While this is happening, however, you may only be able to imagine it coming back in your favor, instead of confronting the possibility of the market continuing against your position.
This type of thought process will continue until the sheer magnitude of the loss overwhelms you, and the possibility of the loss increasing is suddenly more pertinent than the possibility of the market coming back. You finally exit the trade never intending or ever imagining you could have allowed yourself to take such a large loss.
There are several psychological factors that go into being able to assess accurately the markets potential for movement in any given direction. One of them is releasing yourself from the notion that each trade that you make will be a winner or has to break-even. At the very least, this illusion will be a major obstacle keeping you from learning how to perceive market action from an objective perspective.
Otherwise, if you continually filter market information in such a way as to confirm to this belief, learning to be objective wont be a concern because you wont have any money left to trade.
If you are in a losing trade, the market could be moving farther and farther away from your entry point, increasing your potential loss by the moment. While this is happening, however, you may only be able to imagine it coming back in your favor, instead of confronting the possibility of the market continuing against your position.
This type of thought process will continue until the sheer magnitude of the loss overwhelms you, and the possibility of the loss increasing is suddenly more pertinent than the possibility of the market coming back. You finally exit the trade never intending or ever imagining you could have allowed yourself to take such a large loss.
There are several psychological factors that go into being able to assess accurately the markets potential for movement in any given direction. One of them is releasing yourself from the notion that each trade that you make will be a winner or has to break-even. At the very least, this illusion will be a major obstacle keeping you from learning how to perceive market action from an objective perspective.
Otherwise, if you continually filter market information in such a way as to confirm to this belief, learning to be objective wont be a concern because you wont have any money left to trade.