In this post, we will discuss a common fallacy among struggling traders: overestimation of a one single trade.
💡The fact is that quite often, watching the performance of an active trading position, traders quite painfully react to the price being closer and closer to a stop loss or, alternatively, coiling close to a take profit but not being managed to reach that.
Fear of loss make traders make emotional decisions:
extending stop loss or preliminary position closing.
The situation becomes even worse, when after the set of the above-mentioned manipulation, the price nevertheless reaches the stop loss.
Just one single losing trade is usually perceived too personally and make the traders even doubt the efficiency of their trading system.
They start changing rules in their strategy, then stop following the trading plan, leading to even more losses.
❗️However, what matters in trading is your long-term composite performance. A single position is just one brick in a wall. As Peter Lynch nicely mentioned: “In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”
There are so many factors that are driving the markets that it is impossible to take into consideration them all. And because of that fact, we lose.
The attached chart perfectly illustrates the insignificance of a one trading in a long-term composite performance.
Please, realize that losing trades are inevitable, and overestimation of their impact on your trading performance is detrimental.
Instead, calibrate your strategy so that it would produce long-term, consistent positive results. That is your goal as a trader.