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10 Typical Trading Errors

1)Refusing to define a loss

2)Not Liquidating a losing trade ,even after you had acknowledged the trades’s potential is greatly diminished.

3)Getting locked into a specific opinion or belief about market direction.From a  psychological perspective this is equivalent to trying to control the market with your expectation of what it will do :”I’m right ,the market is wrong.”

4)Focussing on price and the monetary value of a trade,instead of the potential for the market to move based on its behaviour and structure.

5)Revenge-trading as if you were trying get back at the market for what it took away from you.

6) No reversing your position even when you clearly sense a change in market direction.

7)Not following the ruled of the trading system.

8)Planning for a move or feeling one building ,but then finding yourself immobilized to hit the bid or offer ,and there after denying yourself the opportunity to profit.

9)Not acting on your instincts or intuition.

10)Establishing a consistent pattern of trading success over a period of time ,and then giving your winnings back to the market in one or two trades and starting the cycle over again.

TRADING RULES

rules-mind

The hardest lesson I have had to learn is to “Act in my own best interest”. And to overcome and correct things like:
1) trading without a stop
2) refusing to admit I am wrong and to get out of a losing position
3) trading for the sake of trading
4) chasing entries (going long on the top tick, shorting on the bottom tick)
5) revenge trading (after a series of losses)
6) trading while sick or tired
7) trading without a plan (entry, exit, money management rules)
8) …
Anytime that I am in a position and either don’t know why I am, or what my profit target is, or what my stop loss is, etc. – I am not acting in my own best interest and have always struggled to close out the position immediately.
The times I have without any further hesitation, it turned out to be a wise choice and saved my butt from significant losses (more so than I already incurred).
The bottom line is that you will do much better in this profession if you can answer YES to the question – “Am I acting in my own best interest”?

Emotion and Trading

While trading I watch my emotional state of mind more than the price action. This has helped me trade better

Here are some of the emotions I feel from time to time and what they mean to me in context of trading

1) hesitation to pull the tigger – something is not right – don’t take the bet

2) anger – start of revenge trading – stop ASAP

3) uncomfortable while watching or not watching the price – non aligned with the market, trading with too much size – reduce size or quit

4) ignoring the little voice and gut feeling – trust the inner voice and take action

5) trading on hope – quit asap

6) thinking after hours or during market hours of money you can make = greed, impatience to make money – focus on how much you can lose

7) stress = wrong side of the market

8) feeling joy = right side of the market

One Liner-Trading Wisdom

If your not sure and don’t have an edge, cash IS a strategy.
If you are on a cold streak, reduce size by 70% and tighten stops for a week.
Stocks aren’t people, they cant be trusted, an algorithm doesn’t care that you think you know the story or the chart.
Don’t be “all in” in any name, you will blow up your account.
It’s totally cool to change your mind right after a trade, the market changes by the minute, so should you.
Pick one strategy and stick to it. This may take time if you are a beginner.
You have to break a few eggs to make an omelet, so take losses but keep them very small.
I haven’t taken someone else s idea in a long time, you have just as good a chance of being right or wrong as some other putz.
Don’t have 15 technical indicators on your screen, that’s and EKG not a chart. Less is more.
Don’t trade pissed off, it will crush your P&L
Guess who wins when you “revenge” trade?
Take partial profits on the way up and raise your stops.
When you have three losing trades in a row, take a walk around the block. You may get an epiphany, at the very least it’s therapeutic.
Realize early that the market will always be smarter than you.

Rules of Trade


Never Mix Disciplines.  If you day trade then day trade and do not let a day trade turn into a swing trade.  If you swing trade do not let your swing trade turn into an investment. Follow the rules based on the discipline of your time frame.

  Never Try To Trade Back A loser.  In other words, each trade is a new one and should not be used to win back money lost in the last trade.  Always trade in the present not in the past where too many emotional and psychology factors can affect the current trade.  Revenge does not pay in or out of the market. 

‘A Trader’s Self-Evaluation Checklist’?

Are trading losses often followed by further trading losses? Do you end up losing money in ‘revenge trading’ just to regain money lost? Do you finish trading prematurely when you’re up money, failing to exploit a good day?

Do you cut winning trades short because, deep inside, you don’t think you’ll be able to make large profits? Do you become stubborn in positions, turning small losers into large ones?

Is trading making you happy, proud, fulfilled, and content, or does it more often leave you feeling unhappy, guilty, frustrated, and dissatisfied? Are you having fun trading even when it’s hard work?

Are you making trades because the market is giving you opportunity, or are you placing trades to fulfill needs — for excitement, self-esteem, recognition, etc. — that are not being met in the rest of your life?

Never Revenge On The Market

There is a direct correlation between your ability to let the market tell you what it is likely to do next and the degree to which you have released yourself from the negative effects of any beliefs about losing, being wrong, and revenge on the markets. Not being aware of this relationship, most traders will continue to observe the market from a contaminated perspective

Never Revenge On The Market

There is a direct correlation between your ability to let the market tell you what it is likely to do next and the degree to which you have released yourself from the negative effects of any beliefs about losing, being wrong, and revenge on the markets. Not being aware of this relationship, most traders will continue to observe the market from a contaminated perspective.—-The Disciplined Trader,Mark Douglas

Ten Common Reasons Traders Lose Discipline And How To Avoid Them.

There is very little that is new in the world of trading psychology but mastering the basics and mastering our mind is essential if we are to develop as highly efficient traders. The following are common discipline issues and suggestions to counteract them. Discipline is needed if you are to succeed as a Forex trader
1. Boredom and a need to trade for the “buzz”
Try to use dead time between trades for things like self improvement training i.e. read a book by your favorite personal development guru or learn to meditate/practice Yoga! Anything that keeps you in the right frame of mind for the job of trading. A positive mindset will have a positive impact on your bottom line over time.
2. Trading when tired.
One of the great things about trading is that we can close for business whenever we want. If you are not in the correct mindset for trading then shut the shop! There will be no customers banging on the door shouting for you to open up.
3. Not taking a loss well and revenge trading (more…)

TRADING EMOTIONS

The hardest thing to master as a trader once you understand Market Rhythm is not the market, it is YOU. Emotional trading will break you fast.

Trading is not hard, it is mastering your emotions that is. Trading will teach you more about your human short coming than visiting a psychiatrist. As a trader, you must learn the discipline of waiting for proper market set-ups. That is hard!

Your EMOTIONS are screaming for you to jump in or you will miss out. NOT TRUE!! If you miss one trade set-up, the market is generous and will give you another. Learn to trade in harmony with your trend and with proper signals.

The emotions that are deadly to your trading success.

REVENGE, we all know it and have done it. It happens when you are tricked by the market and decide to take another trade before looking at the big picture, then BAM you are on the wrong side of the trade again. Pissed off and refusing to move while your money is going further down the drain. Scared to let go for fear that you are going to get tricked again.

PANIC, that is when you lack the confidence to enter or ride a profitable trade. This happens when you have taken some hits and now you lack the confidence to trade profitably.

IMPATIENCE, this happens when you can’t wait for a proper trade set-up and jump on a price hiccup/retracement, often finding yourself on the wrong side of the trade.

ANGER, you know that feeling that comes over you when you have taken a hit or two and you want to kill your computer. (more…)