- Most of the time, you want to own the stock before it breaks out, then sell it to the momentum players after it breaks out. If you buy breakouts, realize that professional traders are handing off their positions to you in order to test the strength of the trend. They will typically buy it back below the breakout point—which is typically where you will set your stop when you buy a breakout. Greed comes into play when the stock breaks out again, and the momentum players are forced to chase it and “pay up” for the stock. Be aware of how trends are established and use that to your advantage to enter and exit positions.
- Embracing your opinion leads to financial ruin. When you find yourself rationalizing or justifying a decline by saying things like, “They are just shaking out weak hands here,” or “The market makers are just dropping the bid here,” then you are embracing your opinion. Don’t hang onto a loser. Cut your losses. You can always get back in.
- Unfortunately, discipline is typically not learned until you have wiped out a trading account. Until you have wiped out an account, you typically think it cannot happen to you. It is precisely that attitude that makes you hold onto losers and rationalize them all the way into the ground.
- Siphoning out your trading profits each month and sticking them in a money market account is a good practice. This action helps to focus your attitude that this is a business, and your business should generate profits on a monthly basis.
- “Professional traders only place a small portion of their assets into 1 position. Or if they take on a large position, then they strictly limit their risk to 1-2% of their current equity. Amateurs typically place a large portion of their assets into 1 position, and they give it “room to move” in case they are actually right. This type of situation creates emotions that ruin accounts, while professionals are able to make decisions and cut losses because they strictly define their risk.”
Archives of “profits” tag
rss10 Common Trading Errors
1. Making trades with insufficient study and practice.
2. Making trades out of harmony with the general trend.
3. Taking a position too late after a move is well under way or is completed.
4. Taking a position too soon due to impatience.
5. Improperly estimating the distance a stock should move.
6. Letting eagerness to make profits warp judgment.
7. Failing to keep a position sheet and selecting stocks on hunches rather than calculations.
8. Buying on bulges instead of waiting on reactions.
9. Failing to place and move stops.
10. Listening to advice from brokers, Blue Channels,, friends, or Website Analysts
Not That Simple
Becoming a good trader doesn’t happen overnight. Just as with any other skill or discipline, it requires time and practice to become proficient at it:
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Not That Simple
One of the biggest problems I see new traders struggle with is the mindset that somehow trading can be approached differently from other ventures or activities. This is something which either comes from too much focus on the prospects of profits and easy wealth building (greed, in short) or from just not considering that it is an activity which requires skill to do well.
Trading is easy. I mean pointing and clicking to buy and sell is about at simple as it gets.
Playing guitar is easy too. Just pluck or strum. No one thinks they are going to pick up a guitar and become the next Jimi Hendrix, though. They know it takes hours and hours of practice to develop even a basic ability to play, nevermind getting to the point of having people pay to listen to you.
Why do people think that things are different in trading?
Good trading requires learning and practice – just like anything else you want to get good at. There are no quick solutions. Don’t expect them, and don’t let anyone lead you to believe that there are.
One of the biggest problems I see new traders struggle with is the mindset that somehow trading can be approached differently from other ventures or activities. This is something which either comes from too much focus on the prospects of profits and easy wealth building (greed, in short) or from just not considering that it is an activity which requires skill to do well.7 Deadly Sins of Trading
Perfectionism: There is no perfection in trading as far as making money on every trade or having a perfect system. All you can hope to be perfect at, is following your system, rules, and trading plan. A winning trade should be measured as one in which you followed all your preset guidelines. Even the best traders only average about a 50%-60% win rate at best over long periods of time. The key is having bigger winners than losers, not being perfect. Like in baseball where a .300 hitter can get into the hall of fame. A .500 trader in the market can become wealthy if his wins are much bigger than his losses.
Fear: Faith in your system is the only way to overcome your fear of trading. You must complete enough back testing on your system until you know that you have a valid edge over the market in the long term. You must see opportunity in trading and just accept that there will be possible losses. You must take your systems trade signals each time and if you can’t overcome your fear of loss and failure then perhaps trading is just not for you. Traders are entrepreneurs not employes they get paid only when successful there is no guaranteed paycheck.
Pride: We are not our trading account and staring at our profit and loss too much is a major detriment in one’s trading. Traders must cut losses at their predetermined stop, not pridefully hang on trying to prove they are right. We must separate ourselves from the trading. A person’s value is not tied to a trade or performance record. If we followed our system then we can’t view that as a personal loss. The market was just not conducive to our system that we followed with discipline. (more…)
What is Luck & What is Skill in Trading?
Luck is picking the right stock and riding it up for great profits, skill is knowing when to get out and lock in profits.
Luck is returning 20% in one month, skill is returning over 20% a year for 5 straight years.
Luck is making money in a bull market, skill is making money in a bear market.
Luck is making money when the market matches your perma bull or perma bear style, skill is making money in both bull and bear markets.
Luck is picking one monster stock, skill is picking three monster stocks back to back.
Luck is having one big bet pay off for huge profits, skill is surviving 200 straight trades and not blowing up your account.
Luck is surviving the market while not knowing what you are doing, skill is acquired after you have done your homework.
So, do you have skills as a trader or have you just been lucky? So far………
18 Trading Champions Share Their Keys To Top Trading Profits
Trading Wisdom
Do more of what is working for you, and less of what’s not. Each day, look at the various positions you are holding, and try to add to the trade that has the most profit while subtracting from that trade that is either unprofitable or is showing the smallest profit. This is the basis of the old adage, “let your profits run.”
Don’t trade until the technicals and the fundamentals both agree. This rule makes pure technicians cringe. I don’t care! I will not trade until I am sure that the simple technical rules I follow, and my fundamental analyses, are running in tandem. Then I can act with authority, and with certainty, and patiently sit tight.
When sharp losses in equity are experienced, take time off. Close all trades and stop trading for several days. The mind can play games with itself following sharp, quick losses. The urge “to get the money back” is extreme, and should not be given in to.
Responsibility
”You must have the ability to ntake responsibility for all of your own trades, and not look at the market as the reason for your loss.It simply is not worth it to get angry with the market….Instead, these traders learned the key to reducing losses and getting on the road to profits is to constantly analyze the trades one makes, and then learn from the mistakes.
Controlling your emotions is key because you cannot win every trade. Successful traders know that they will lose some of the time. By having a risk management/trading plan they can avoid major losses and enjoy their profits.
Take note of this quote! It makes a valuable point!
The journey to becoming a winning trader
| You need to learn to execute without fear or hesitation. You need to accept that you will get stopped out when you are wrong. And you also need to accept that the only way to really accumulate profits on your account is to let winners run. And finally, the fourth and probably most difficult step is to push your winners, or in other words, you add to your winning positions. |