Why do many people prefer to hold on to a position and lose money rather than stop loss and leave the market?

Among 10 people who lose money, at least 7 do so because of carrying orders. Carrying orders is a millennium-old problem that causes trading losses. Almost every time the market goes in a big one-way direction, my friends cry to me that they suffer heavy losses from carrying orders and that their positions have been liquidated.

It is a common problem for many people who carry orders, resulting in serious losses and refusing to change. Today I will talk about several reasons why people carry orders, as well as solutions to deal with them.

There are five common reasons for holding orders:

1: The problem with the trend is that there are many false market conditions.

Most market conditions are volatile, with ups and downs, downs and ups. If an order is incurred at a loss when it enters the market, you can hold on to it without a stop loss. In this way, you can suffer less loss during the volatile correction. The market can even reverse and turn losses into profits, and the orders that were originally subject to stop losses can now be held to profits.

There are also many false breakthrough trends. When the market breaks through, the orders should be stopped. After a while, the market recovers and the original stop-loss orders turn into profits.

With more experiences like this, people will be unwilling to stop loss and prefer to hold on to the order, as they will gain real financial benefits by not stopping loss.

2: Loss aversion.

No one wants to lose, and losing brings a lot of insecurity. We hate losses by nature. Just like the pain we feel when we lose 1,000 yuan in a failed transaction is much greater than the pain we feel when we make 1,000 yuan in a transaction. This makes us naturally unwilling to face losses, and we hope that the price can be adjusted back. We keep repeating "I will get my money back, and I will run away" every day, and we are always looking forward to the day when we can turn losses into profits.

3: Self-esteem that is unwilling to admit mistakes.

Many of us traders are very confident in our judgment and have strong self-esteem in trading. They think that stopping loss means admitting that they are wrong and that the market is only temporarily out of control and will go in the direction they expect sooner or later. They just need to hold on. Sometimes they even share their positions and directions with others. When they lose money, they are unwilling to stop loss for the sake of face and continue to hold on.

4: Emotional trading.

I was bullish on the trend before, but after making a few long orders, I was stopped out by the falling market, which made me numb and emotional. At this time, I became unwilling to admit defeat and started to fight against the market. I said, "If you want a fall, I will be bullish. I don't believe you won't pull back." As a result, I suffered heavy losses after holding on. I had to admit defeat.

5: Lack of experience and planning.

Most traders have never considered the issue of stop loss before opening a position, nor do they have a trading plan, let alone a complete technical standard for stop profit and stop loss. All positions are opened and closed based on feelings. When the order is trapped, they can still smile at the beginning, but when the trap is too deep and they start to think about stop loss, it is too late. In the end, they have lost so much anyway, and they are trapped like this, maybe they can get out of the trap one day. In the end, the more they bear the greater the loss, they are completely unable to stop loss.

Are there any solutions to these 5 problems of carrying orders?

1: You need to understand the consequences of not stopping loss.

If you have not personally experienced the harm of something, you may keep trying it out of luck until you get hurt.

But in fact, we do have ways to experience it firsthand, such as simulated trading and replaying. These are things that don’t cost anything. You can just set a standard and don’t set a stop loss. If the order is stuck, just hold on. As long as the time period is long enough, you will definitely encounter a situation where an order is stuck for a long time, or even directly hit by a unilateral market. Then you will find that it won’t work without a stop loss, and you will always encounter a margin call.

2: Have a clear stop-loss method.

You have to set your own stop loss standard, where to stop loss, and execute each transaction according to this standard, so that the stop loss setting is meaningful. After trading for a period of time and strictly stopping loss, you will have a different mentality experience.

3: Be confident in your stop-loss standards.

Having a stop-loss standard alone is far from enough. After several consecutive stop-losses, we get scared, entangled, and don’t want to stop loss anymore. This shows that we have no confidence in our stop-loss techniques.

To generate confidence, you need to do two things: one is to review your trading system a lot, and know that your stop loss technology is effective and feasible. Although the order will encounter a stop loss, the trading system as a whole can make a profit. The other is to have a clear understanding of your consecutive stop losses, how many consecutive mistakes you have encountered in history, how large the retracement is, etc., so that you can have confidence in stop losses.

4: Read more books and learn to control your mentality and emotions.

In fact, there are many books on trading psychology on the market. The mistakes everyone makes and the things they experience are similar. The reason why many of us cannot succeed is because we lack self-awareness and do not know how to solve our emotional problems, such as loss aversion, recency preference, gambler's fallacy, etc. These are common problems. Only by recognizing ourselves can we correct the problems, manage our emotions well, and use reasonable positions to avoid heavy trading and emotional out-of-control.

5: Use pending orders.

After the order enters the market, we can directly place a stop loss order. During this period, we should not keep watching the market, keep a certain distance from the market, do what we should do, let it automatically execute the stop loss, and do not give the opportunity to hold the order. This can largely solve the problem of not being able to stop loss.

I’m Brother Ming. I’ve been in the trading market for more than ten years. If you have any questions about trading, you can talk to Brother Ming!