The Human Nature in Trading: The Psychological Shift from 'Holding on' to 'Cutting Losses'
In trading, human psychology often fluctuates. At first, when trapped in a losing position, many believe they can hold on, but as losses continue to grow, over time, their mindset begins to change. The initial belief turns into: 'God bless, as long as I can break even, I will sell immediately.'
Bottom Fishing and Top Picking: The Trap for Most People
In trading, bottom fishing and top picking are almost always an unprofitable strategy. Many investors, when attempting to bottom fish or top pick, often hold onto a mindset of 'holding on without cutting losses,' and this blind persistence ultimately leads to liquidation. Worse still, during the process of holding on, the psychological pressure on the trader gradually increases. Even if the market finally reverses after a long wait, investors find it difficult to profit because they often can't wait to close their positions the moment they break even.
The Correct Response: Cutting Losses is the Key
This is precisely the manifestation of human nature in trading. If a mistake is made at the beginning, one should cut losses immediately and not delay. If losses are not cut at the first opportunity, it becomes increasingly difficult to make the decision to liquidate as the situation worsens. Losses will continue to grow, and the trading mindset will undergo dramatic changes. Ultimately, when holding on reaches the limits of psychology and capital, the true bottom or top of the market will have already arrived. At this point, even if you break even, you will not be able to calmly profit from it because your mindset has fundamentally distorted.
Conclusion: Do Not Let Yourself Become a 'Big Wave Retail Trader'
When you finally decide to liquidate, it is often at an extreme position in the market: either at the top or at the bottom. Do not think that the market will fluctuate due to your single action; in fact, many investors are experiencing the same psychological struggle. Even if you ultimately 'held on' successfully, after breaking even, you often do not have a good mindset to continue profiting because your psychology has been overly consumed during this process.
Therefore, cutting losses and timely adjusting one's mindset are the most important strategies in trading. Only by staying calm and responding rationally can one achieve long-term success in the market.