It’s often said in trading that we need to be patient with our winners, and impatient with our losers. And yet people on average always act the opposite. They hold on to their losers for far too long hoping things will turn around and let go of their winners too quickly. This cycle repeats and they scold themselves that they need more patience. I’d like to argue the opposite is true.
Think of the times “patience as a virtue” comes to mind. Parents and teachers dealing with unruly kids, waiting in line, waiting for your turn to come. In all these cases, patience is the tool we use to keep ourselves calm WHEN THINGS ARE BAD.
The definition of patience in fact is the ability to endure pain while remaining calm. How can we possibly be patient with our winners - when the underlying implication is that it is going well? How can we not desire to hold on to our losers when everything inside us is screaming that if we just wait it out, things will get better?
If we think of patience like a chart, patience is the oversold RSI grinding towards a mean reversion. It is the knowledge that we can’t stay in this horrible state forever. However, just like a chart, we can form new lower highs - our baseline for what is acceptable can become lower and lower, and we can adapt to that new mean. Our moving averages can keep falling lower.
In trading, and in life, we want the exact opposite. We want higher highs and higher lows. We want mean reversions in our trading and our lives to constantly become elevated to new levels. While patience might get us to the oversold bounce, we need action, momentum and volume to break our own resistances.
Not letting winners run is not a lack of patience, it is far more likely that it is an abundance of fear. Fear that we will turn a winner into a loser, fear that our targets were wrong, fear that we were wrong. To hold to target, to let your winners run, to stick to your game plan is not something to do out of patience, it is something to do out of courage. While patience is the ability to endure pain, courage is the ability to act in spite of fear. Have the courage and confidence that despite your fear, you will act in ways to compound your gains, to stop out of trades that are not serving you, to keep your consolidations healthy, to constantly work to elevate yourself to new highs.
