You don’t still think compounding your trading position is all about technical skills, do you?
After all these years of trading, I’ve come to understand more and more: technical skills determine how you enter a trade; your mindset determines whether you can hold on to profits and control drawdowns.
Many people think that if they can read candlestick charts and draw trend lines, they can steadily grow a small account. But when it comes to compounding, the hardest part often isn’t the technical side—it’s whether you can keep your emotions in check.
First, stop trying to buy at the perfect price every time.
You plan to add to your position after a 10% rise, but rush in when it’s up 8%. When it reaches 15%, you worry you’re chasing the price and insist on waiting for a pullback. The result is that you either enter too early and get shaken out, or watch the opportunity pass you by.
Compounding doesn’t require you to buy at the absolute low every time. What matters is waiting for a signal and following your plan, instead of letting your emotions lead you around.
Second, don’t refuse to cut your losses just because you can’t accept being wrong.
When a trade goes wrong, you start holding on. As the loss grows, you think about adding to your position to lower your average cost. In the end, one drawdown could wipe out all the profits you worked so hard to earn.
A string of stop-losses isn’t scary. What’s scary is knowing your judgment was wrong and still refusing to admit it. A stop-loss isn’t a failure; it’s a necessary cost of limiting losses and waiting for the next opportunity.
Third, don’t treat unrealized profits as money that’s already yours.
You’re up 10% and want to make 20%; when you reach 20%, you hope for 30%. Then the market pulls back, your profits shrink, or even turn into a loss
After all these years of trading, I’ve come to understand more and more: technical skills determine how you enter a trade; your mindset determines whether you can hold on to profits and control drawdowns.
Many people think that if they can read candlestick charts and draw trend lines, they can steadily grow a small account. But when it comes to compounding, the hardest part often isn’t the technical side—it’s whether you can keep your emotions in check.
First, stop trying to buy at the perfect price every time.
You plan to add to your position after a 10% rise, but rush in when it’s up 8%. When it reaches 15%, you worry you’re chasing the price and insist on waiting for a pullback. The result is that you either enter too early and get shaken out, or watch the opportunity pass you by.
Compounding doesn’t require you to buy at the absolute low every time. What matters is waiting for a signal and following your plan, instead of letting your emotions lead you around.
Second, don’t refuse to cut your losses just because you can’t accept being wrong.
When a trade goes wrong, you start holding on. As the loss grows, you think about adding to your position to lower your average cost. In the end, one drawdown could wipe out all the profits you worked so hard to earn.
A string of stop-losses isn’t scary. What’s scary is knowing your judgment was wrong and still refusing to admit it. A stop-loss isn’t a failure; it’s a necessary cost of limiting losses and waiting for the next opportunity.
Third, don’t treat unrealized profits as money that’s already yours.
You’re up 10% and want to make 20%; when you reach 20%, you hope for 30%. Then the market pulls back, your profits shrink, or even turn into a loss