The Psychology of Holding Winning Trades

Building Mental Strength for Running Winning Trades

Knowing when to hold onto your winners and when to cut your losers is crucial. It’s a delicate balance that requires not only a sound strategy but also a strong mental game.

The Importance of Trading Strategy and Outliers

Your trading strategy needs to make sense.

You can’t lose 1R and make 1R. Even with the strongest of edges that’s just not going to cut it.

Most strategies require the occasional 3,4,5,10R trade to make them profitable.

So, it’s important to master the art of running winning trades.

However, it’s important to remember that not every trade is meant to be held for bigger targets. Distinguishing between quick “A to B” trades and potential “runners” is important to optimising your strategy.

Cutting Losers and Holding Winners

The first rule of thumb is straightforward: cut your losers. 

Not every trade will go in your favour, and it’s crucial to avoid the trap of holding onto losing positions in the hope they’ll turn around. 

On the flip side, some trades are worth holding for longer, allowing the market to pay you for being right. Whether it’s for a specific price target, a set period, or until the market’s price action signals it’s time to exit.

Decision-Making and Mental Strength

To improve in holding trades, you need to make your decisions clear from the start. 

Decide in advance which trades have the potential to be runners and which should be quick exits. 

This approach takes the pressure off by removing the constant questioning of right or wrong during the trade. Remember, once you’ve planned your trade, sticking to it becomes a mental game.

Developing Mental Resilience

Negative self-talk can be your worst enemy. 

It’s natural to feel the urge to close a profitable trade prematurely, so practicing positive self-talk is important. 

Keep reminding yourself of your strategy and goals, whether through a spreadsheet, mental rehearsals, or any other method that helps reinforce your resolve to hold onto deserving trades.

Practical Hacks to Enhance Your Trading Discipline

  1. Start Small: Begin with small positions and gradually increase your holding time to set new personal records.
  2. Acceptance: Understand and accept that not every trade will go your way. Learning to be comfortable with this fact can significantly reduce the emotional burden of trading.
  3. Leverage Success: Use successful trades as confidence boosters. Allow the positive emotions from winning trades to motivate you in future decisions.
  4. Use Tools Wisely: Implement practical hacks like setting timers, “set and forget” strategies, or scheduled intervals for trade review to help maintain discipline.

Summary

To become proficient at running trades, you must:

  • Identify potential runners before entering a trade.
  • Prepare mentally for the urges and emotions involved in holding a trade.
  • Utilise practical hacks to maintain discipline, such as timers and scheduled reviews.
  • Practice consistently to perfect your approach.

Trading is as much about strategy as it is about mental fortitude. By following these guidelines, you can improve your ability to hold onto winning trades and cut losers, ultimately becoming the trader you wanted to be.