#9 Never Chase a Win, when trading
Want to know the quickest way to watch your trading account self destruct? Chase the win. It’s one of the easiest traps to fall into when your emotions run high in your trades. It looks like this: You’re in a trade. You’re confident and adamant that you’re correct in your assessment of the market and then it happens. You’re staring at the chart as it moves the complete opposite direc- tion, limits you out and then moves quickly back in your direction. You see red. You scramble, placing the trade again in the middle of the move, maybe even throwing more money in your trade to make up for the loss... Wrong again. Now, the market reverts back to the original trend (the trend where you were limited out earlier). Bam! You’re losing again... Worse yet, you’re now losing more than you would have originally. You see, when you emotionally invest in your trade, you make mistakes. You cannot chase a win. When you decide to re-up the trade or act brashly, you’re throwing your account in the fire. You’re no longer trading... You’re gambling for returns.
You’re letting your pride determine the trend you’ll ride rather than the technicals and you’re out to prove the market wrong. As the FX Chief says: “The market’s never wrong. Your job is not to teach the market the lesson. The goal is to work with the market, learning its lesson for you. Never trade with the intention of making the market go your way. Trade with the way of the market.”
Live to trade another day. If you were smart with protecting your account with the equity management techniques we discussed earlier, you should be able to manage that amount lost because you have already determined that that amount of risk was something you could stomach. Chasing the win puts you at risk for losing more than necessary, giving you less funds to work with in future trades where you might win that money back.
Stick to the plan, man! Stick to your trading plan. Accept a loss and move on to the next trade.