Mental management of stop-loss — Are you entering every trade with “desperation” and “sure victory”?

Genesis Mental Management.06

This time is a mental management related to the extremely important “stop loss” among trading skills.
When entering, you set a take-profit target and a stop-loss location and enter…
Sometimes discretion alters the exit that was initially decided.
One representative of this mechanism is the famous “Prospect Theory.”
Mental state at entry.
Mental state during holding.
And mental state at the time of settlement.
In fact, each requires a different kind of mental management.
This time I’d like to talk about stop-loss mental management, which is essential for escaping being a “parasite.”

⚫︎ Why stop losses are difficult
◯ The calculation of gain or loss: stopping losses reduces margin
◯ You hesitate to realize losses because you think the situation might improve if you wait a bit and watch
◯ In cases where your entry basis is a zone (not entry on support/resistance or channel lines, but pullbacks or rallies within a range), you get confused about the judgment
◯ You had decided to cut if it breaks here, but it continues as a shadow (wick) and you go on

etc.—even though you know in your mind that you must cut, the “discretionary judgment” gets in the way and you miss the stop loss timing. I have experienced this before.
An important point here is the case where discretion leads you not to stop out and you are saved.
Because there are times when you avoid stopping losses, this “saved experience” also interferes with the growth of stop-loss skills.
What should mental management be like?
The key is to mechanically and calmly carry out the stop-loss operation.
In other words, discretion inevitably causes hesitation when stopping losses.
Therefore, to carry out stop-loss mechanically and calmly, there may be ways that suit each person’s personality, but I will discuss one approach.

The point is at entry time.
For example
“Assume I will sell if the support-resistance conversion line is not broken.”
In this way, you enter with a hypothesis.
On a longer timeframe like a 4-hour chart, you might sell from the high of a notable upper shadow.
This is also “sell assuming the wick top is not broken.”

Sell from the wick top.
Not based on a vague reason like “if the wick top is not broken, sell,” but suppose it would form a double top if the wick top isn’t broken, and sell with that assumption.
Strongly cultivate the mindset to enter with that assumption.
We often discuss at VC that “if the justification collapses, stop loss,” but…
The awareness that you entered with your own predicted price movement in mind is very important.
At that time, including how wide a range you will tolerate as noise in your forecast helps set the SL on a mental basis.
And then the mindset remains.
I looked at how closely my predicted movement (technical analysis) matched the actual movement, as if I intended to verify it.
Huh?
Completely different…
It’s scary, so let’s not!
That is the usual feeling.
There are several ways to reduce the loss amount.

① Look at the chart and see where the stop loss would be if you entered now
and when you confirm the stop-loss location, don’t actually enter; wait and observe until that point.
The area near the stop-loss can be the best entry point

② Assume you are currently without a position even if you are currently losing on paper.
Suppose you’re short and you get squeezed and pushed up.
Just before the stop-loss line, if you are pos-less, would you go long from there?
If you are pos-less and you decide to enter, when the answer is short, do you cut with the initial SL or do you average down (nampin) with the other thought, and manage the position?

Will either of the above two points affect your mental state at stop loss?
Mental state at entry.
Mental state while holding a position.
In this flow, you are unlikely to have much mental strain.
Because you feel it was a stop loss that prevented further losses.

If you enter by discretion and become anxious about price movement, and finally end up stopping out…
Wouldn’t everyone’s mind be affected?
Stop loss that tortures you gradually like being strangled by a soft scarf (true anxiety).
I hate it.
While managing mental state to prevent further loss and while maintaining position management, you can examine the situation and come to a conclusion to stop loss.
'I predicted my movement and technical analysis was wrong! Something feels off!' is the feeling when stop loss occurs.

This is a very important mental management.
This tolerance for unrealized losses differs depending on a person’s capital management and lot size.
How you think about and face stop loss.
Expense and cost are the orthodox concepts, but humans cannot easily realize losses with discretionary judgment.
At least, let’s manage the mental state until the stop-loss skill improves.