Are You Executing Your Planned Exit Strategy?

It has been said by many top traders that knowing where to exit a trade is the art of trading. I know several people who have tested random entries with good money management who have proven that you can earn profits with good exit strategies.

Many traders have a good plan for their exit strategy, but talk themselves out of it.

Why do traders talk themselves out of a good strategy for exits when they have proven in testing that their plan would work if they just followed it?

Fear of loss

As you see profits slipping away, very often emotions start rising. When emotions get to a tipping point of too much psychological pain you pull the plug on the trade. If you avoid losses you set yourself up for not trusting in your rules. If you would have earned profits, you become angry at yourself and do not trust your ability as a trader. Either way, when you do not follow your rules, you set up negative anchors that condition inconsistency.

Solution:

1. Understand where you will start feeling uncomfortable about a trade going against you by revisiting it your mind's eye.

2. Make it part of your rules to allow yourself to exit one beat after you start to feel uncomfortable, even though you know that for you to make money on the trade you must adhere to your ideal stop. At least you are following pre-determined rules of your making.

3. Keep a journal that shows what you would have earned had you stayed with your stop and what your decision to come out early has cost you. You might have to do this in simulation if you do not have the funds to train yourself for proper trading.

4. Each time you are in the same position of wanting to exit before the trade has run its full course, stretch one more notch.

5. If your trading works better by exiting too early, then you should go back to looking at the rules of your strategy. If you would have earned more money in following your rules, revisit each trade in your mind's eye and play back a scenario where you do the right thing over and over. Notice if you feel comfortable in hindsight. If you do not, then you need deeper work with a trader's coach.

Fear of being wrong

There are those traders who cannot allow themselves to have a trade go against them even if they are following their rules. They cannot accept the fact that part of the overall win in trading has to come from the acceptance of losses.

Solution:

1. Define being wrong as not following rules.

2. Reward yourself with external praise from yourself and others when you accept a loss that is a result of following your plan. You can start by going back to trades that were losses and see yourself on a movie screen patting yourself on the back and verbally out loud giving yourself praise and have others do the same. Then do the same thing internally feeling the associated emotions.

3. Now you're ready for real time. Give yourself the same praise and instruct others to give you praise and add a physical reward.

4. If this self-induced conditioning still leaves you with the feeling of being wrong, then you need help, and I suggest my Trader's Evaluation.

Fear of being right

There are those traders who do not allow themselves to be successful in trading because they have unresolved issues of the past that make them feel guilty or undeserving.

Solution:

1. Make an agreement to give a percentage of your winning trades to others. For some traders feeling the obligation to others makes them make better choices.

2. Choose to do activities that will make you feel good about yourself such as joining Toastmasters International or volunteering for service to others.

3. Repeat affirmations each day such as: “I am a worthy person who deserves profits in my trading as long as I follow my rules.”

4. Realize that you might have deep-seated issues that you should address with a trader's coach.

Conclusion

When you have tested good results from following your exit strategy, the only thing between you and earning profits are issues within yourself that should be dealt with. If you let these issues continue, they will set up negative conditioning. Handle issues from the beginning so you can realize the profits you deserve.

Adrienne Toghraie coaches traders and investors to their next level of success by helping them overcome their self-imposed limitations. She has been a keynote speaker since 1989, author of 13 books, and owner of TradingOnTarget.com