Small losses suck! The more often they happen, the more it feels like a knife keeps poking you in the gut. It’s one of those annoying things that just starts chewing at you. That’s the problem with small losses and why many people don’t want to take them. Psychologically, many people hate to take a loss or admit to loss.
If you study psychology in depth you will know that suffering comes from two things.
- Threat of loss
This is the reason we try to avoid it because from that comes pain. With stock trading goes the same way. It is why many amateurs say I just want to get back to even. Or I will take only a 1% hit, not a 10% hit because then they will feel like they didn’t lose. It’s all about the mentality and psychology. However, the stock market is all about mentality and psychology. You can’t win and beat your self at the game. You can beat yourself up, but you won’t win at it that way. The only way to win at the game is to be in control of your emotions and psychology. It’s to be humble and respect loss, fear, anxiety, and embrace it.
Why do I say this?
If you embrace loss, anxiety, and other emotions that come your way, you will know when you should be training and when you should step back and take a day off. The fact is that many people try and force trades and it just doesn’t work. The only way to make real money is to know yourself and let your emotions go.
If you’re constantly crying to trying to get back to even, how long will you cry for? What if the stock dips from $100 a share to $50/ share? Will you still cry? What if it goes to $25? or $5 – and you are at a $100,000 loss.
Don’t be scared to take a loss! You have to remember to cut your losses quickly and quit being so cynical about it. Sometimes we screwed up our timing, things changed, or did the wrong thing. That’s okay. It happens in life all the time, but man-up take your hit and move forward. If you continue to hold on to your little loss, eventually one of them can dip at low levels and never come back. Hope and prayer will not help you in the stock market. Trade right, stay humble, and cut your losses quickly.