One of the most difficult things in trading is associating pain or pleasure with following (or not following) your trading rules, and not from your day-to-day trading results.
Trading results are random. That is a fact.
For example, let’s say you have an edge that results in you being profitable 60% of the time. This means that you will still lose money on 40% of your trades. Beating yourself up for these losses has zero benefit to you as a trader.
We are battling ourselves
The human psyche is fragile. We are battling our egos.
Sometimes in trading we get more concerned about being “right” than making money. This is why we sit on losing positions, hoping they come back in our favor. This is why we don’t take small losses, allowing them to turn into big ones.
I was stuck in a rut, which I’m working towards getting out of. Today has been a step in the right direction for me. Today my focus is on following my trading rules, not make a profit per se. This is really hard to do. Besides, isn’t the goal to make profits after all?
Associate positive feelings with following your trading rules, not the end results
Accepting that a trade is going against you and cutting it should be associated with positive feelings because you cut those losers early.
No one wants to lose money, and that’s why it’s so hard to associate a positive feeling with taking a loss. Taking losses sucks, and we all wish they were avoidable.
It’s difficult to do this. Losing money hurts. But, it’s important to reframe losses as a cost of running your trading business.
I have to remind myself to be impatient with losing trades. I can’t fear cutting a loser too soon. If trade doesn’t feel right and isn’t going the way I expect it to, it’s okay to cut it.
I have to remind myself to not look back at trades that have been cut loose. This look back bias makes me kick myself for not holding a trade longer. This is detrimental to my future trading performance, because I end up holding losers longer that should’ve been cut the moment they no longer felt like good trades.
I have to remind myself that I can always re-enter a trade if an attractive setup presents itself once again.
Dealing with randomness
Establishing a set of trading rules, and sticking to those trading rules has proved to me to result in more profitable trades rather than focusing on profits alone.
If you have a legitimate edge in the market, a set of good trading rules to follow, then profits will follow as result of disciplined trading.
Enlightenment Investing 