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QuantSchool: Exiting losing trades with discipline

The Psychology of Cutting Losses

Successful trading requires accepting small losses to prevent catastrophic ones. Learn to exit losing positions mechanically before emotions take over.

Essential Exit Rules

1. The Hard Stop-Loss

• Set before entering any trade
• Place as actual stop order (not mental)
• Never move stop further away

2. The 1% Rule

• Maximum 1% account risk per trade
• $10,000 account = $100 max loss
• Adjust position size accordingly

3. Time-Based Exits

• Close if trade doesn't move as expected
• Typical windows: 3 days (stocks), 4 hours (FX)
• Prevents "hope holding"

QuantWave Exit Triggers

Signal	Action	Rationale
Price hits stop	Auto-exit	Preserve capital
Volatility spike	Reduce position	Manage risk
Model invalidated	Close trade	System integrity

Emotional Control Techniques

1. The 24-Hour Rule

• Wait a full day after 3 consecutive losses
• Reset emotional state
• Review trading plan

2. Loss Journaling

• Record reason for each loss
• Identify patterns
• Adjust strategies accordingly

3. The "No Excuses" Rule

• No override of system exits
• No "averaging down"
• No revenge trading

Common Exit Mistakes

• Moving stops further away
• Hoping losers will recover
• Taking small profits to "offset" losses
• Doubling down on bad positions

Discipline Checklist

1. Set stop before entering
2. Calculate proper position size
3. Submit stop order immediately
4. Accept loss when stop hits
5. Review trade objectively

Professional traders win by losing small. By implementing these mechanical exit rules and using QuantWave's disciplined framework, you'll survive losing streaks and live to trade another day.