One of the most disastrous mistakes traders make is trying to "fix" an initial bad trading decision. Instead of accepting the loss and cutting their losses in time, they try to find ways to "save" the losing trade, such as:
Top Up:Â Hopefully by adding more money to the account, they can âaverage outâ and eventually break even or make a profit.
Find new entry points: Continue analyzing to find new entry points, hoping that the market will reverse and turn a profit.
Apply complex strategies: Use complex trading techniques such as hedging, averaging, in the hope of "turning the tables".
Why are these actions dangerous?
Subjective psychology: When making a mistake, many traders often find it difficult to accept the loss and try to justify their decisions.
Loss of Control:Â Trying to fix a losing trade can cause a trader to lose control of their emotions, making rash and irrational decisions.
Increased Risk: Every time you deposit more money or open more orders, the risk of loss increases.
Missing Good Opportunities:Â While trying to salvage a losing trade, a trader may miss out on other good trading opportunities.
So what is the solution?
Cut your losses promptly:Â When a trade goes against you, cut your losses immediately to limit your losses.
Review your strategy: After cutting your losses, take time to review your trading strategy, find out what went wrong, and adjust accordingly.
Be patient: Don't rush to reopen a new order after cutting your loss. Wait for a clear opportunity and stick to your trading plan.
In short:
Cutting losses is not failure, it is part of the trading process. Accepting losses and learning from mistakes is essential to becoming a successful trader.
If the first button is fastened wrong, then fastening the last button is still wrong.
Remember, a small wrong decision can lead to big consequences if not corrected in time.
