prepared to accept that if the price can get to your stop loss level, then you are
wrong.
Ego is a roadblock of stop losses. You must be able trade your plan with
discipline to override your ego. Trading too large makes it difficult to take your
initial stop loss because it’s easier to hope that it will come back than it is to take
the big loss now and accept defeat. It is easier to take a small loss than a big loss.
Staying on the wrong side of a losing trade is dangerous because eventually you
will be on the wrong side of a trend with a large position size, and you could lose
it all.
Every profitable trader must develop the skill of accepting a loss when they have
been proven wrong. Every time that you take your stop loss and your trade
bounces back, you may think that you don’t need stop losses and you should
wait for a reversal. The reason we have stop losses is the same reason we have
brakes on our cars or insurance on our homes. We may not always need them,
but it is a bad idea to expose ourselves to the risk of ruin by not having that
coverage the one time that we need it.
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