Why We Close Winning Trades Early
Have you ever asked yourself why you take profits too early, but let your losses run to the full stop? Have you ever wondered why you feel the tension, emotion and desire to close your winning trades too early before hitting your take profit level – even though the trade is already in profit and moving favorably for you?
Today I am going to tell you the answer.
There is an underlying reason for this, which actually goes beyond your emotions, trading history or experience. It is always present, yet is like your shadow – always close following you, but not something you can pin down. Every time you are in a winning trade, you seem to experience this want to close the trade early.
You may have prepared mentally for your trading day, yet you still experience this desire to close your position early. You’ve heard the saying, ‘nobody every goes broke taking profits‘, which is completely false as demonstrated here.
You’ve told yourself hundreds and hundreds of times you’d never close your winning trade again early. That you’d hold the trade till your take profit level. Yet more often than not (despite your best intentions), still close the position early.
You’ve asked yourself this question dozens of times before. You’ve created rules for your systems, written out a trading plan, put post-it notes on your monitors, yet you still do this.
There is one reason which has been present with you since your first trade, and is there right now which I’m going to tell you about.
And the answer is a biological one.
From an evolutionary perspective, we were not built to be traders. We are biologically wired in our brains NOT to be successful traders. This is one of the main reasons why so many traders fail. To have a successful trading mindset, we have to actually UNDO millions of years of wiring and evolution.
Biologically Wired to Not Trade Successfully
Our brain has gone through several evolutions which helped us to adapt to our environment. We have our older brain, which is referred to as our ‘reptilian’ (or lizard) brain. Our ‘limbic brain’ sits right on top of our reptilian brain & brain stem (where we send signals to the rest of our body).
It’s actually a brilliant design, because if we need to get the F-out of dodge (i.e. are running from a Lion that wants to eat us), it helps us send a quick signal through our body to fight or run. This is known as our ‘fight or flight’ mechanism, and it’s hard wired into all of us.
Now keep in mind, this system can react in less than a second activating all kinds of hormones giving us the feeling we will be in a fight to the death, or need to run in panic mode. It can control our emotions, fears and thoughts in the blink of an eye.
Unfortunately, it causes us to make quick and rash decisions, which in 99% of all trading situations does not help.
To top it off, there is another portion of our brain which hurts our trading performance. It is a portion of our brain called the ‘amygdala’, which is biologically wired to see the negative in our environments more than the positive.
Because negative threats represent a greater danger to our survival than positive ones. It takes us about half a second to notice a threat, yet it takes several seconds for us to recognize something that is good for us.
And there you have it. This is the reason – this is why you take profits too early. Every threat and ‘negative’ piece of information on the chart tends to activate this ‘fight or flight’ response in us and a potential danger.
This leads us to register it as a ‘threat’ to our winning trade. When this happens, our brain will create a rush of hormones, thoughts and emotions which produce a tremendous impulse for us to close the trade early.
The trade may be following all your rules for entry, have a ton of positive factors supporting the trade, yet one negative candle against us – and we panic. We worry it will go negative. We fear it will turn into a loss, and we close the trade early.
This is why so many traders fail and do not make money consistently. You are constantly fighting your biology and thousands of years of evolutionary wiring to trade consistently – to hold onto winning trades. We are swimming upstream against our biology to have a trading mindset that is geared towards success.
How Can You Change This?
Luckily, there is a way to change this wiring we are all born with. There is a way to rebuild your neural connections to hold onto winning trades without the fear, worry or panic. There are ways to build new neural pathways to trade successfully.
We are building this program as we speak – to help you re-wire your brain for success, to rebuild your neural pathways. Instead of closing your trades early, you hold on till your full profit target for a large winner. Instead of making emotional trading decisions, you are wired for successful trading.
We have already created one program for this via our ERT training, which many traders have already taken, and are noticing huge changes – both in their trading, and in their lives.
The second program for this will be announced shortly with the same goal – to re-wire your brains for successful trading.
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