The most successful traders and aggressive investors learn from their mistakes. Many even go as far as writing down what went wrong and analyzing the problem. Mistakes can be costly, so use them as learning experiences and don’t make the same mistake twice. Unfortunately, many people are doomed to make the same mistakes over and over again. This behavior is usually a sign of emotional reactions to price momentum and the absence of any well-thought-out strategy. My father once told me that the best education comes from learning from the mistakes of others. Most people fail in the market not because of technology or a lack of information but because of emotional reactions and a failure to learn from their mistakes and the mistakes of others.
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The stock market rewards discipline.
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Common Mistakes for losing Money
Trading is an evolutionary process. Nobody can wake up being a Master Trader. Unfortunately there is no book or magic trick that can turn you into the highly profitable trader. Although the belief and the hope to obtain those skills instantly is still in place.
The statistics say that only the ones with the self-dedication and discipline succeed in this business.
The most common mistakes leading to losses:
-Trading against the market;
-No trade potential;
-No serious buyers or sellers in the stock;
-Wide stop-loss;
-Fear of loss.
Traders should stay calm during the trading, this helps to observe and analyze the situation on the market much better, see some small details and make a competent decision.
Panic, stress or fear, always lead to mistakes.
One of the serious problems in trading is rush and mania to be present on the market all the times, opening positions when there is no potential for a trade or where the market is either flat or going the other direction.
Tips to resolve the mistakes:
1. Always look at the market. If there is no clear picture of the market’s behavior, don’t risk your money.
2. Always look at a trade potential. If you look at the daily charts and see that the daily bars are just 20 cents long, then look for other stocks, where the potential is at least 40 cents.
3. Always look either at the Open Book or Market Maker window and Tape. If you don’t see any order flow on the Tape or the order sizes are small (less than a 1000 shares), then don’t enter the trade.
4. Always know where you are going to place you stop-loss order. If it is more than 10 cents away from your entry point, don’t enter the trade.
5. If you’re just not sure, or if the situation is uncertain, don’t enter the trade.
Following these tips requires some work and changes to our habits. It is not easy at all! We always hear sayings that the trader should be disciplined. What it actually means is changing your old habits and training yourself to have new ones. It is not comfortable, but it brings positive results, which will be noticeable on your month-end P/L report.
A Bad Teacher
The World’s Worst Teacher
The market often rewards bad behavior. You exit a stock because your stop is hit. You are okay with this because you followed your plan. The market then immediately reverses. You begin to think, “If only I stayed with the position.” The next time the market goes against you, you decide you are not going to get tricked again. This time though, the market does not reverse and what started out as a small manageable loss is now huge.
The market will give you loss after loss forcing you to abandon a methodology right before it takes off without you. On the flip side, the market will lull you into a false sense of confidence. You trade larger and larger, taking on excessive risk. You print money until your risks become so excessive that one or two bad trades wipe you out.
Learn from the market, but realize that sometimes it can be a lousy instructor.
The World’s Worst TeacherFocus
Focus requires drive, nothing less.
Focus is mandatory for success.
To keep it, momentum’s required within.
One must be motivated to win.
Never discount the value of this.
Always maintain it, or be powerless.
Whenever you’re overcome with frustration.
Harness your focus and try try again.
Focus.
A true story
| “I heard this from one of my professors. To protect him, no names will be revealed. This professor was about to get married. He went to the jewelers to get a wedding ring for his fiancee. The jeweler told him that he can have the inside of the ring engraved with the name of his fiancee for an additional $20 (remember, this was a LONG time ago). He said, “But that will reduce the resale value!” The jeweler was aghast. He said, “How can you say such a thing. You are a butcher!” “No,” replied the professor, “I am an economist”.” |
How To Be A Consistent Winning Trader
However gravity is holding you down, you need to thrust towards escape velocity until you break into higher orbital
