Ego and trading: what does yours cost you?
Ego costs money in specific ways: refusing to take a loss, needing to be right, revenge on the market, refusing to ask for help. The bill arrives in the account statement.
Where does ego bite you?
- the ego-driven decision you keep making
- how you catch it in real time
- the humbling event that shrank it
The stop-loss guide is ego's natural enemy — it admits the possibility of being wrong.
Background: Where to place a stop-loss: structure, volatility and time stops
A stop-loss belongs where your trade idea is proven wrong, not at a round number of pips. Here are the main methods and the mistakes that trigger stops early.
How far away should a stop-loss be?
Far enough that normal price movement doesn't reach it, at the point where the reason for the trade would be proven wrong. The position size should then be set so that distance costs a fixed share of the account.
Why was my stop-loss hit when the chart didn't reach it?
Charts usually show the bid price, but sell positions are closed at the ask. When the spread widens, the ask can reach a sell stop while the bid line on the chart stays below it.
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