After years of experiencing the highs and lows of trading, I’ve come to realize that two key principles significantly impact success in the markets.

Fight Only the Battles You’re PAID For
Most of the time, the markets reside in neutral zones, searching for direction. Buyers and sellers continuously vie for dominance, but the prevailing trends often lack the momentum to support significant movements. As a trader, success hinges on patiently waiting for those moments when the balance decisively shifts, and only then seizing the opportunity.
An impatient trader my often find himself with a position in a neutral zone with a great risk-to-reward, hoping that that market will deliver a low probability winner.
Avoid experimenting with the markets, set safe stops and realistic targets, and stay in your primary.
But even more importantly…
Cut Your Losses MORE Quickly
Imagine this scenario: Sarah, a passionate trader, took a position in a tech stock she had been eyeing for weeks. She meticulously chose her target and sized her position wisely. After hopping into the market, she visualized the substantial profits she’d make once her target was hit. At that exact moment, she fell in love with the potential outcome.
Then, unexpectedly, the market started moving against her. She felt a pang of disappointment, but because she was emotionally invested in the position, she clung to an emotion that offered some comfort:
Hope…
In the professional world of trading, hope is a dangerous sentiment. Instead of cutting her losses, Sarah hoped the market would reverse in her favor. It briefly turned, offering a glimmer of optimism, only to plunge further against her, edging closer to her stop loss. Dumping a position so close to the stop didn’t seem wise. So, she held on, nurturing her hope, and watched her losses grow.
Meanwhile, across town, John, a veteran trader, was facing a similar situation with a currency pair. He had entered the market with high expectations but soon found himself on the wrong side of the trade. Unlike Sarah, John had learned the hard way about the perils of hope. Years ago, he had been in a similar position with a commodities trade. Back then, he had held on too long, hoping for a reversal that never came, resulting in significant losses.
Determined not to repeat past mistakes, John quickly cut his losses and exited the trade. He reminded himself that he could always re-enter the market after a quick, small loss. This disciplined approach kept his emotions in check and preserved his trading capital for better opportunities.
Back to Sarah, who, after getting stopped out, was still emotionally attached to what the market "should do." She re-entered at the next signal, falling into the trap of revenge trading. This cycle continued, eroding not just her capital but also her confidence.
To break free from this destructive pattern, remember:
you can always re-enter the market after a small loss.
Maintain your professionalism by accepting that anything can happen in the markets. By doing so, you avoid getting entangled in emotions and stay focused on the rational execution of your trading strategy.
Trading is as much about managing emotions as it is about analyzing charts and trends. Sarah eventually learned this lesson after a series of costly mistakes. She started to adopt John’s disciplined approach, cutting losses quickly and avoiding the trap of hope. Over time, her results improved, and she became a more resilient trader.
The markets are unpredictable, and hope can often kill your results. By fighting only the battles you’re paid for, and resisting the urge to hold onto losing positions, you can navigate the markets with greater success and less emotional turmoil.
Stay professional, stay disciplined, and let go of hope. It has no place in your trading strategy.