Cutting losses is the hardest thing for any investor, because it touches the ego and the feeling of losing. So how to practice discipline and make it a reflex instead of an internal battle?
1. Build rules in advance – Don’t think about it when trading
• 💡 Reason: In a volatile market, it's easy to make emotional decisions without prior principles.
• 🎯 Method: Before entering a trade, set a maximum risk level (e.g., 2% of the account) and always commit to adhering to it. This makes cutting losses an essential part of the plan.
2. Accept reality – Cut losses to protect yourself
• 💡 Reason: Consider cutting losses as insurance for your account. Each small loss you cut is a time you preserve capital to win on another opportunity.
• 🎯 Method: Focus on the long term, remembering that a small losing trade is not as important as the entire investment journey.
3. Record emotions and lessons after each cut loss
• 💡 Reason: Cutting losses will always hurt, but if you analyze and record the reasons, you will turn that pain into experience, not regret.
• 🎯 Method: After cutting losses, write down:
• Why did you enter the trade?
• What is wrong in the analysis?
• Emotions when pressing the cut loss button?
• Gradually, you will find cutting losses easier.
4. Look at the numbers instead of emotions
• 💡 Reason: When you only look at the loss/gain numbers instead of the overall plan, emotions will take over you.
• 🎯 Method: Instead of obsessively looking at "how much money I lost", look at the remaining capital ratio and the opportunities ahead. A small loss will not make you lose everything unless you lose control over it.
5. Continuous practice with small scale
• 💡 Reason: Discipline is formed through repeated action. Cutting losses multiple times within small limits helps you build "discipline muscle".
• 🎯 Method: Place trades with small amounts to practice cutting losses without significant pressure. Once you are accustomed to cutting small losses, you will no longer fear larger amounts.
In summary:
Discipline is not something that comes naturally; it is built from facing painful truths and intentional repetition. Cutting losses is not failure—it's how you ensure your survival and come back stronger.
"You cannot avoid losses, but you can control them. Discipline is the strongest weapon in this game."