What is mental management at break time? ~ A high-stakes gamble! Should you leap in at full speed, or quietly eye the next opportunity and wait for a chance? ~

Tenyuan Mental Management.08

Price movements transition from a squeeze (consolidation) to an expansion (a range break in either direction), moving as if in a certain breathing pattern.
Within this breathing, price moves up and down with a heartbeat-like fluctuation.
If you don’t align your entry timing and entry point with this breathing and heartbeat, you won’t have a stress-free trade.
Conversely, what kind of trade feels extremely stressful?
When it runs completely against you after entry, such as being trapped by high prices or selling from the bottom while aiming for a breakout and getting faked out, it’s a common, in-a-sense a fake situation that you can recognize as a familiar scenario. You can handle it as a normal occurrence.

However, true stress comes from holding on through long periods of unrealized gains or losses.
Once you enter and it stops moving,
at this moment, mental management is necessary.
① Breathing didn’t match
→ Because you entered during a squeeze, monitor whether it expands in which direction and set a stop loss for adverse movement to prevent an accident.
Preventing accidents leads to mental stability.
② When it has entered a range, choose to exit with trading skills
→ Set the range width, apply averaging in, and first exit.
Prioritize the mental state where you don’t want to hold.
③ Whether you make a profit or loss doesn’t matter, but it’s very stressful when you’re trapped
→ If you feel stressed about holding a position, you can reset by small profits or small losses. If the entry justification hasn’t collapsed and you simply failed to read the time-frame (breathing), it’s hard to judge to cut losses.
Decide the priority for cutting losses in advance.
If you prioritize maintaining your emotional state, cut losses.
If you prioritize the basis of your decision, handle with a stop loss.
④ What does it mean to prioritize the basis of your decision?
For example, if you shorted because you thought the price wouldn’t break above a returning high and it didn’t break above, but it tested multiple times and seemed ready to break, you cut losses on that expectation.
But afterward, the returning high still didn’t break, and the price dropped sharply like a waterfall.
Even a small loss, if the basis hasn’t collapsed, is a pattern where you think holding would have yielded huge profits, which weighs on your mentality.
→ Holding stress equals negative price movement expectation. Weigh this stress against the stress of not fully trusting your entry basis to decide priorities.

Even before a breakout, there is mental management.
Now, the main topic begins.
If prices break out from a consolidation and you imagine you have no position.
You were aiming for the breakout, but at a moment you looked away, a strong move has already started.
There are four options.
① Jump on it
② Wait for a retrace and then enter
③ Do nothing as a loss of opportunity
④ Short in anticipation of a reversal after price movement stops
I did all of them.
In the end, there were both wins and losses.
There is no single right answer to entry itself, so I think you can try anything.
But it should lead to trades that connect to the next steps.
In short, it’s about the mental state.
If your mind is affected, you will likely fail in options ①–④. Let’s assume that ①–④ failed and affected the mental state.
① Breakout jump-in failure
→ It’s important to avoid a whipsaw. If you set a cut-loss line at the moment of breakout failure during entry, this trade can be concluded.
If you tried to grab the breakout and failed, then doubled down, that’s the worst for your mind. The priority between cutting losses and the basis mental state matters.
② When you thought retracement was a good place to buy the dip or sell into a pullback and it moved against you

→ Since you’re reacting to a price move after achieving the range, you’ll regret not watching a longer time frame, but you can apply it next time.
③ Not doing something doesn’t affect profit or loss, but you’ll have a mental itch that you should have entered when your forecast was correct.
I find that the mental pain from opportunity loss is worse than from cutting losses, so once I decide to enter after assessing the environment, I enter first.
Because trading after your mind has been compromised is hard, it’s important to prioritize those who aren’t affected mentally.
④ Counter-trend
→ If you can shift from aiming for a breakout to targeting the next price move, that’s okay.
Reassess the environment and aim again; it won’t affect your mind much.
Even if it breaks out, counter-trend with a short-term chart feeling of a wick or reversal is still not good.
Even if you gain profit on that trade, someday it could trigger a major accident.

Trades aiming for breaks have foreshadowing.
Enter from a consolidation with the aim to break and capture the breakout firmly.
Capture firmly after the breakout.
Wait until after the breakout direction becomes clear to enter.
If things go well, any of these are fine.
Mental management focuses on preventing mental collapse when things don’t go well.
Connecting mental management to trading helps identify which entry method suits you and leads to developing a method.
Although I used breakout as an example, this kind of mental management is necessary for all trades.
Plan for the worst and strive for the best.
This is not only about chart actions.
Rather, isn’t doing your best mentally the most important thing?
I will continue sharing mental management from different angles.