We often fall into this pattern:

We initially predict a favorable market trend, but when the market experiences a steep decline, whether normal or not, it triggers our stop-loss. Shortly after being stopped out, the price rebounds swiftly as if targeting our stop-loss. At this point, we feel the urge to re-enter the market hastily, driven by a fear of missing out. However, right after we jump back in, the price retracts again, trapping us in a losing position.

After our stop-loss gets hit, the desire and impulse to re-enter the market becomes particularly intense. With consecutive losses piling up and actual losses on our account, we become eager to recoup them quickly. We start engaging in trades and opportunities we wouldn't normally consider. Tempted by market movements and fearing missed opportunities, our mind is solely focused on making back the lost money.

In such situations, we may fall further into this trap: fearful of more losses, we become overly cautious with our positions, making them more sensitive. This causes us to set smaller stop-losses, making it easy to get knocked out repeatedly. The more we trade under these conditions, the more our technique deteriorates. Instead of trading a few times a week, we end up trading dozens of times a day. The quality of our signals diminishes, stop-losses become narrower, and we trade frenetically, like we're losing control.

There are two main reasons for this psychological pattern:

1. The unwillingness to accept losses and the urge to make up for them. In our eagerness to recover from losses, we jump at any temptation on the screen, fearing we'll miss out on opportunities to recoup our losses. We become fixated on recovering from where we stumbled. If a stop-loss happens on a particular asset, we're likely to stubbornly stick to it, thinking "If only I hadn't stopped out then, I wouldn't have lost now. I regret that stop-loss," leading to a relentless battle to recover from that very asset to find psychological relief.

More commonly, this manifests as frantic trading. After a stop-loss, any slight rebound in the market prompts an immediate re-entry, resulting in frequent stop-losses. Intraday false signals abound, making us easily led by market movements, enhancing this chase-the-market mentality.

This often leads to choppy, directionless markets, where we keep getting whipsawed back and forth.

2. Fear of missing out on a major future trend. We dread stopping out too early and missing a big trend. If the market continues in the originally anticipated direction after we've exited, we feel frustrated and regretful. Seeing the market move slightly in the expected direction, we convince ourselves that a major trend is unfolding and that we can't afford to be left behind. Fearful of missing out on the continuation of a favorable trend post-stop-loss, we jump back in unnecessarily.

A typical example is the transition from a bull market to a bear market. At the onset of a market crash, many recognize the need to exit and do so promptly. But when the market declines further or experiences a minor rebound, they rush back in, fearing that the market may have hit bottom and the bull run will resume. This typically occurs during a period of continued declines, trapping them again and leading to further losses. This cycle of eager re-entry and continued losses traps them in a prolonged state of loss and regret.

When a stop-loss triggers a hasty re-entry, it's easy to engage in trades and opportunities we normally wouldn't consider, leading to the trap of frequent trading and ongoing losses. In real life, stopping out on one asset can make us anxious to recover losses, prompting us to jump into other assets when signals trigger. This leads to a cycle of continuous stop-losses across multiple assets, exhausting us with constant, unproductive trading.

Different assets are systematically interconnected. When we fall into a systemic turmoil, most assets will be in disarray, such as during a bear market when the majority of stocks are subject to erratic declines. Thus, in trying to recover losses eagerly, you end up facing repeated setbacks across various assets. This not only harms your trading mindset but also significantly depletes your account, making the recovery of losses almost impossible.

The solution:

Reset each trade to zero. Start every trade anew. Ignore past trades and evaluate the current opportunity independently. Consider: Does this trade signal meet your entry criteria now? Stringently stick to the criteria: if it genuinely fits, you may proceed. If not, or if there's uncertainty, avoid entering the trade.

Remind yourself that after one stop-loss, you shouldn't enter another trade lightly. Most times, after a stop-loss, the market does not present another valid re-entry signal. Usually, there's no need to consider re-entry, and since you've already stopped out once, you need to enhance the validity of the signal further and filter out false signals.

Understand that post-stop-loss, the market may quickly rebound, causing you to miss subsequent trends. Accept this as part of your trading system—it’s something your system should accommodate. Many trends will inevitably be missed; they are fleeting guests. You can’t capture every market move, but focus on capturing those within your capability. Let go of those you miss; some trends are unavoidable, and you can catch those instead.