Thread by @RamsayRippers

🚨HOLDING LOSERS TO LONG/SELLING WINNERS TOO SOON THREAD🚨

This thread is intended to give insight into strategies that will maximize your winners and minimize your losers. I credit this information to one of my favorite day trading guides by Ross Cameron! Enjoy.

(1/14) Holding Losers Too Long:

Fear of loss in trading can manifest itself in some unusual and outright counterproductive ways. Many beginner traders and most failed traders will experience the tendency to hold their losers too long and sell their winners too soon.

(2/14) The driving emotion that leads to this behavior is the fear of losing. Why does a trader hold losers too long? It's because a trade is not a loss until you've hit the sell button. There is always a chance that the price could pop back up until you hit the sell button.

(3/14) The fear of making the loss real keeps you in the trade because it makes you think about finding a way to turn it around instead of just taking the loss and moving on. In reality, small losses are not a big deal, but trading in an emotional state does not think that way.

(4/14) Sometimes traders will make a bad trade worse by averaging down, adding shares at a lower price to reduce their cost basis. This typically results in bigger losses when it is not part of a proven strategy that involves scaling in and out of trades by averaging.

(5/14) I have seen traders who set $200 max losses, and on a trade when they were down $200, instead of simply cutting the loss, they decided to add more shares so they could trade out of the loss. These trades would often end in losses of -$1000 or more.

(6/14) In hindsight, it's easy to say the right thing to do was simply cut the loss at -$200 and follow the rules you made for yourself. Unfortunately, in the heat of the moment, emotions take control and your rational thought processes get thrown out the window.

(7/14) In those cases, the fear of loss actually resulted in the trader taking bigger losses than the rules of trading would allow for. This is the exact opposite of what you want. The most important skill for a new trader to understand and adopt is the ability to cap losses.

(8/14) Selling Winners Too Soon:

If I enter a trade that has good profit potential and it fits into my trading strategy, the last thing I want to do is sell before it has had a chance to work. If I'm up 10 cents on a trade that has the potential to make 50 cents, why sell?

(9/14) Why do so many traders sell their winners too soon? Most of the time it's because the fear of loss has guided their decisions. It's the fear of the small winner turning into a loser that convinces us to sell the trade too soon.

(10/14) Just as a loser isn’t real until you hit the sell button, a winner isn’t real until you’ve hit the sell button and locked it up. In the short term, we feel happy to lock up some profit, but the big picture is that you're forming a habit of capping winners.

(11/14) Successful traders cap their losers and let winners run. You'll want that occasional big winner because those will tide you over during periods of slow trading. A trader that sells winners too soon and holds losers too long has the habits of a failing trader.

(12/14) To avoid failure it's important to address how emotions are influencing trading. Instead of selling the full position when sitting on a small profit, I combat that urge by selling a partial position and adjusting my stop.

(13/14) This means I'll walk away with some profit, but still have a position in the trade to let it realize full potential. This is called scaling out which is a great trade management method of keeping partial positions with a good cost average.

(14/14) To maintain discipline, I refuse to sell my final position until I get stopped out by a valid exit indicator.

Make sure to follow for more threads and educational info like this!