"Things to avoid — entering the market with multiple sheets and withdrawing through diverse cutoffs" (from The Psychology of Magicians)

Continuing from yesterday,

from the words in the section written about trailing stops.

It describes things you should not do when closing a position.

"Things to avoid — designed to avoid losses, yet the universal trading rule of 'cut losses small, let profits run'完全ly contradicts the act of closing a position, and that kind of closing produces large losses and small profits. This type of closing involvesentering the market with multiple lots and withdrawing through various partitions.For example, you might start trading with 300 shares, and when profits and losses are balanced for all 300, you may sell 100 of them. Then you might take another 100 shares at a $500 profit and hold the remaining 100 for a big gain. Short-term traders often use this kind of strategy.Physiologically, this kind of trade may look like it “guarantees” profit, which seems rational.However, if you study this kind of closing in a truly detached way, you will understand how dangerous this kind of trading is."

Wow, I’m doing exactly that...

"The profits have come in, but we’re near the recent high... it feels like a double top might come down... but if we break above the high, it would be frustrating... so! I’ll take half of the profit!" like that.

And there are cases like this, too.

"I averaged down when it moved against me, but it started moving in my favor, it’s break-even now... if it continues in my favor, it would be frustrating... so! I’ll lock in half of the position!" like that.

It deviates from my rules and becomes wildly inconsistent.

Are these emotions of anxiety and fear winning?

In backtesting I didn’t verify partial profit-taking either...

That means I’m doing things I haven’t tested with real money.

What I’m doing has become unnecessarily complicated...

Alright! I’ll graduate from last-ditch partial profit-taking (laugh).

See you next time.