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Explanatory Style

pessimist-optimistThe way you respond to winning and losing periods will depend largely upon your explanatory sytle.How do you ex-plain misfortune ?How do you explain good fortune ?In short ,are you basically optimistic or pessimistic in regards to trading ?

When a good thing happens to an optimist ,he says it’s permanent ,pervasive and personal.When a good thing happens to pessimist ,he says it’s temorary ,specific ,and not personal.Conversely ,when a bad thing happens to an optimist ,then he says it’s temporary ,specific ,and not personal.When a bad thing happens to a pessimist ,he says it’s permanent ,pervasive ,and personal.

Overconfidence in Trading

Overconfidence bias is an magnified belief in your competence as a trader. Any trader who finds themselves thinking that they know the business inside-out and that they have nothing more to learn and that profits are theirs for the taking, may well suffer from an overconfidence bias. 

Dangers of Overconfidence 
Overconfident traders tend to get themselves into trouble by trading too frequently or by placing tremendously large trades with the plan of making a killing. It’s not inevitable, but an overconfident investor invites misfortune. 

Are You Overconfident? 
If you want to identify whether you have a tendency to be overconfident, ask yourself, “Have I ever delayed or reversed a decision because I couldn’t accept that I was wrong?” Likewise, you could ask yourself, “Have I ever placed more on a trade than what I know is really sensible?” 

Overcoming Overconfidence 
One way to overcome an overconfidence bias is to stick to a strict set of risk management rules. These rules should limit the number of markets you invest in, the number of Contracts for difference you trade at one time, how much you are willing to risk on any one trade and how much of your account are you willing to lose before you take a break from trading and re-evaluate your trading strategy. 

5 Trading Pitfalls To Avoid

Pitfalls1. Aiming too high – There is no quick way to get rich. You need to be realistic in the goals you set and do not overpromise yourself. The success in trading is the ability to follow through.

2. Trying to win them all – – Keep adding to a loser position instead of getting out. The result based on impulsive trades usually becomes a lot worse before it gets better.

3. Hoping to recover from big drawdown – Get out of your losing positions quick. It is inevitable that you get caught in the wrong end of a trending market. Always a day late and many many dollars short !

4. Don’t know when to stop/check – It is time to reflect when your system loses the edge. Don’t send yourself into mine fields. Take some time off and regroup your strategy.

5. Being stubborn – Don’t fight the wrong fight and keep kicking yourself. Remorse about your misfortune won’t changed what have happened. Trading is supposedly fun, challenging and rewarding. If you  don’t feel this way, please stop trading.

5 Trading Pitfalls To Avoid

1. Aiming too high – There is no quick way to get rich. You need to be realistic in the goals you set and do not overpromise yourself. The success in trading is the ability to follow through.

2. Trying to win them all – – Keep adding to a loser position instead of getting out. The result based on impulsive trades usually becomes a lot worse before it gets better.

3. Hoping to recover from big drawdown – Get out of your losing positions quick. It is inevitable that you get caught in the wrong end of a trending market. Always a day late and many many dollars short !

4. Don’t know when to stop/check – It is time to reflect when your system loses the edge. Don’t send yourself into mine fields. Take some time off and regroup your strategy.

5. Being stubborn – Don’t fight the wrong fight and keep kicking yourself. Remorse about your misfortune won’t changed what have happened. Trading is supposedly fun, challenging and rewarding. If you don’t feel this way, please stop trading.