Tilt Prevention

Sean McLaughlin
November 3, 2022

The concept of “Tilt” is often discussed when things have gone awry. It’s usually associated with poor risk management and sloppy trading that has led to larger-than-expected losses.

You can no doubt find endless stories of traders in every timeframe who have gone on tilt and proceeded to wreck their month, their capital, and sometimes even their careers.

We’ve all experienced some degree of this in our own trading. It comes with the territory. It takes a rare human who possesses the mental fortitude to stay completely focused no matter what’s happening to their portfolio. Those people are out there – but they’re hard to find.

The downsides of going on tilt when our trades or strategies aren’t working out are fairly obvious.

But we rarely talk about when we go on tilt with a winning position!

This might sound crazy, but it’s fairly common to find ourselves in a winning trade that has gone far beyond what we thought was possible. When this happens, we get caught up in a weird fear/greed tornado where we’re both greedy and hopeful for even more gains, while terrified out of our minds of losing our sudden windfall.

This is a strange place to be.

I’ve harped on this in the past, but it bears repeating. The best way I know to prevent myself from getting into a tricky mental spiral that prevents me from acting in my best interests is to always have a plan BEFORE getting into the trade.

Again, fairly obvious why this is important for a trade or strategy that is losing money. But it’s equally important for trades that are going our way! Where are we taking profits? What is our signal that enough is enough? At the end of the day, we’re here to make money and therefore a plan for harvesting profits is essential.

Yes, I do believe the old adage that “profits take care of themselves,” but there still needs to be a set of rules and/or circumstances that alert us that it’s now time to book our profit and celebrate our win. If we don’t, we expose ourselves to making emotional and poorly-timed decisions that are detrimental to our long-term success.

Have a plan for winning! Then win.

~ @chicagosean

Filed Under: