It is a common saying in the forex market that a trader should cut his losses short and let his profits run. To aid this profitable mentality, perhaps it would be best to think about our orders in a different way.
Most traders are used to the terms "stop loss" and "take profit" with regards to orders/levels. These terms imply that loss is something to be stopped, and profit something to be taken. It seems to me that, in order to change our perception of these orders, we should call them the converse.
That's right - let's call them "take loss" and "stop profit". These names reveal the orders for what they really are. We want to close out a position that has run against us only when we're sure that it will keep going against us. That is, we want to "take a loss" only when we know that we have to. The same for profit - we want to only close out a profitable position when we're sure that it will stop going our way. We only want to "stop our profit" when we're fairly certain that it will not continue to grow.
By reversing the verbal bias on the order labels, we make the decisions sound less preferable. Who would want to take a loss or stop their profit? While it seems this might hinder our trading, it actually helps. Both of these decisions are actually not preferable with regards to our bottom line. "Stopping loss" and "taking profit" sound great, but in reality they are reducing the potential for profit! It is better to have labels that actually convey the negative consequencies of taking losses or stopping profit to the growth of our accounts.
Psychology is a major component of trading, especially for the newer trader. I hope that conceiving of your orders in this way might help you on your way to a profitable trading experience.
Good luck!
Most traders are used to the terms "stop loss" and "take profit" with regards to orders/levels. These terms imply that loss is something to be stopped, and profit something to be taken. It seems to me that, in order to change our perception of these orders, we should call them the converse.
That's right - let's call them "take loss" and "stop profit". These names reveal the orders for what they really are. We want to close out a position that has run against us only when we're sure that it will keep going against us. That is, we want to "take a loss" only when we know that we have to. The same for profit - we want to only close out a profitable position when we're sure that it will stop going our way. We only want to "stop our profit" when we're fairly certain that it will not continue to grow.
By reversing the verbal bias on the order labels, we make the decisions sound less preferable. Who would want to take a loss or stop their profit? While it seems this might hinder our trading, it actually helps. Both of these decisions are actually not preferable with regards to our bottom line. "Stopping loss" and "taking profit" sound great, but in reality they are reducing the potential for profit! It is better to have labels that actually convey the negative consequencies of taking losses or stopping profit to the growth of our accounts.
Psychology is a major component of trading, especially for the newer trader. I hope that conceiving of your orders in this way might help you on your way to a profitable trading experience.
Good luck!