Latest Posts

rss

Trading Mistakes: Avoid at all Costs

  
  Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

Common Mistakes to Avoid while Trading:

  • Failure to cut losses: Pride, ego, or stubbornness prevents the trader from selling.
  • Not knowing “how much” to trade on each position: Overtrading positions can kill your account and take you out for good (risk of ruin). (Learn to position size)
  • Average down in price: Placing good money after bad is a loser’s game.
  • Listening to rumors: Forget the talking heads, rumors and tips as they are nothing but garbage and a sure way to substantial losses
  • Lack of patience: It takes years to master trading as an advanced skill; even then, you are never done learning or adapting
  • Not knowing when to sell: Determine your price objectives and risk-to-reward ratios prior to entering the trade; never allow emotions to make this decision.
  • Buying 52-week lows: Don’t be afraid to buy stocks making new highs. The garbage sits at the bottom along with weakness and downward momentum. Buy strength and the momentum moving higher.
  • Pure Fundamentalist: Technical analysis is a must! Use candlestick charts that show the price, volume and major moving averages – this is all you need, don’t complicate the process.
  • Making trading decisions based on taxes: Never buy or sell based on taxes alone.
  • Buying based on dividends: Don’t buy based solely on dividends; most growth stocks will never give out dividends
  • Buying familiar names: Yesterday’s leaders are not likely to be tomorrow’s stars. Look for solid new companies with great earnings, sales and a product in demand. Don’t buy a stock based on a popular household name.
  • Lack of action: Be able to move on a dime. Time is money, don’t procrastinate or hope for something that may never happen.
  • Lack of Consistency: Develop a method suited to your personality; stick to it and don’t trade blindly.

The World’s Worst Teacher

  
  Education
#  #  #  #  #  #

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.

Only You Can Control Your Trades

  
  Education
#  #  #

Just to be very clear, the term be in control does not mean controlling the market. In fact, I have not met anyone who can control the market. From all the traders that I’ve spoken to and the books that I’ve read, all professional traders tell the same thing –

“Take control of your trades and let the market do what it does best.”

Can you see the attitude that professional traders carry with them? Professional traders take control of what is within their control and focus on making those controls work. In actual fact, they even expect the market to be random. They put so much effort in making the trade perfect that it doesn’t bother them when the market doesn’t go their way.

Now, let’s come back to our world. If the professionals take full control of their trades, don’t you think you should be doing the same thing? If you know that you should be in control of your trades, then, can the market be at fault in any way? I hope the answer is no and I hope you realised that you are in control of your trades and not the market.

Go to top