It is easy to get one’s mind clouded by thinking of profits and losses, money is important in our society. Amateurs often want to take profits and keep losses for obvious reasons of human nature.
I think of trading being a game where I follow my entry, exit and risk management rules. The goal is not to break any rules.
It is not important what the P&L of a single trade is. It is irrelevant if exiting a trade increases or decreases the overall value of the trading account that moment. A professional trader goes with the flow without any influence on the outcome of a single trade. The process of edge repetition will most probably grow the account in the long run.
Money is a tool to play the game and keep score, without money the game is over. Losses are the cost of running a trading business. A trader should keep costs low to run a sustainable business.
The disposition effect that Daniel Kahneman describes in his book “Thinking, Fast and Slow”: investors are risk averse with profits and risk seeking with losses, meaning they tend to realize profits fast and hold on to losers. It comes from human nature while professionals have learned to do the opposite.
Once a trader learns that it’s not about a profit or a loss but about asset transfer from equity to cash due to some happening at the moment, there’s no commitment to holding a loser and trying to predict the future.
Lesson Learned: I don’t take profits and losses, I exit.
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