Overcome the Fear of Losing Paper Profits

Submitted by Craig Strzelecki on 19 January, 2006 - 12:26

Looking over my past trades [there's a lot of them - over 70 buys and sells in a year... so about 35 total trades in 6 months - I took a 6 month breather - a "trading holiday"] there's a common theme that runs through all of the profitable trades. [I only lost out on a few so I've got many profitable trades to look at] The common theme is this: I get excited by the profits and so I close the trade way too early. This is done without any consultation of the charts or any second thought. Why am I doing this?

I went to one of those seminars the other day promoting their share trading education software/package. [By the way - I've never bought any of these things - As I noted in a previous posting I don't buy any tipping sheets or subscriptions either. I believe in learning myself - from my own mistakes - otherwise I would just become complacent about it - even though people spend thousands on these packages.] Anyway, I was at the seminar and one point they raised was a significant wake up call to my own situation. I knew it was happening but I needed someone else saying it to really consider the problem. Traders know (or should know) that emotions and human nature are the major follies of share trading. If we do without them we would be robots but we would be trading without the excitement or fear to cloud our thoughts.

As you learn the art of Trading you will find that during a trade there is a progression of maturity and emotions, churning within you. My problem of selling early, that is, I've got paper profits on the table, each tick up or down entices you to sell and realise the profit. But as a trader you should know when to exit or not using the charts and not this emotion. the emotion is the underlying fear of losing just a portion of your profit. Even when you've secured a part of your profits already and have no risk in the trade (If you don't understand what I'm talking about then you aren't an advanced trader yet - keep reading this blog!) traders are still faced with that fear and the urge to sell and quickly realise those trading profits.

So the key to the problem of selling too early is to overcome the fear of losing paper profit... Beginners may not know what I'm talking about - but those people who do - good luck with your trading and remember not to pull out too early because of a little fear and excitement.