Many traders fall into the trap of holding on to losing positions, hoping that the price will eventually recover to their entry point. On the other hand, when they are in a profitable trade, they often exit too early, securing minimal profits out of fear. To thrive as a trader, you need to reverse this approach: be more cautious when faced with losses, but allow your profits to grow when you win. It is important to set a stop-loss strategy for your losing trades, rather than clinging to hope. Conversely, when you are in a profit, let the trade run and take those profits.
Let me illustrate with an example: Suppose you bought #ETH for $3200 on the spot market and the price starts to fall. Your mentality might be, "Since I bought it outright, I'll wait for the price to recover." But over time, the price of #Ethereum continues to slide. Without a stop loss, you would have to hold the asset, waiting for the market to recover so you can break even or make a small profit.
After a considerable amount of time—say four to seven months—the price may eventually return to the price at which you entered, and in a rush to avoid another downturn, you close the trade. Whether at breakeven or with a small gain, you exit early for fear of another downturn.
While you may argue that you avoided a loss, the real issue is the wasted time. Holding onto that asset for months prevented you from seizing other profitable opportunities or engaging in short-term trades. This approach can become a vicious cycle, as you continually lock your capital into underperforming positions, stunting your overall growth as a trader. Many of you may have bought various altcoins at unfavorable times and held onto them for too long, hoping for a market recovery that may never fully materialize.
