Like the psychology of expectations, there is another emotional obstacle that often prevents objective analysis of open positions, traders often worry that unrealized profits may disappear.
"'Cut losses quickly and let profitable positions continue to grow', this is a bit of a cliché, but it is also an unchanging truth. Many people do just the opposite. Everyone wants to profit, and internal regulations often encourage it."
"Many people regard unrealized profits as nonexistent. They think that profit realization only represents real profit, and before that, it is all fake; exiting with a loss is equivalent to admitting a mistake."
Similarly, traders have to get rid of the "must profit" complex. On the contrary, the crux of the problem is: whether the basis for establishing a position is correct. To maintain an objective attitude, Bernard Oppetit's focus is on the relevant expectations of the position.
"If the expected event does not happen, I will exit. Whether the exit is profitable or loss-making, it is not important at all. As soon as I find out that the scenario I judged is wrong, I will exit immediately."
"There is another similar and easier situation to deal with, if the things I expected to happen have already happened, I should also take profits. These two situations are relatively easy to handle, but the development of the situation is between the two extremes, which is more troublesome."
It is necessary to deal with open positions with an objective mentality, which is the key point emphasized by Bernard Oppetit. This means that you have to pay attention to some problems and ignore others. You have to pay attention to the following points:
- Has the expected situation happened?
- Facing the current price, do you want to buy or sell?
- Is the probability of achieving the market development expected when establishing the position still the same?
You have to ignore:
- How much loss has the position suffered so far?
- How much profit has the position accumulated so far?
- The cost of establishing the position.
- Expecting the market to move in a favorable direction.