How to overcome the behavior of "holding on to losses and running away when making a profit"?
Why is this happening? The reason is simple because we are human beings, and humans are fearful and greedy animals. Psychologists have found that people are more disgusted with losses than they are with gains. So we feel more sad when we lose 100 yuan than when we pick up 100 yuan. This psychological phenomenon is called loss aversion.
Loss aversion can make us make wrong decisions in trading. If there is a floating loss in the account, we will regard it as a loss and be unwilling to admit and accept this loss, that is, we are unwilling to close the position, and even choose to increase the position without logic. When there is a floating profit in the account, we will be eager to protect and enjoy this profit, and worry that the price will fall and the profit will disappear, so the loss aversion mechanism is triggered-quickly stop profit and exit the market. Such impulsive and impatient trading habits will inevitably lead to limited profits and magnified losses. It is like an invisible shackle that binds our trading thinking and behavior.
So how to overcome the psychological weaknesses of human nature, do reverse operations, and return to the true self. In fact, the method is very simple, which is to establish a scientific, reasonable, and effective trading system and strictly abide by it. A good trading system should include: determining the opening position, stop loss and take profit positions, determining position management, and risk control rules. Only by strictly abiding by the trading system can we overcome the psychological weaknesses of human nature and have the root of operation. Trading is a kind of practice. Only by continuous learning and thinking can we make continuous progress and surpass ourselves!