10 Deadly Trading Mistakes!
The following are 10 most common but deadly Trading Mistakes, which traders should avoid at all costs. Anyone of them can literally destroy one's financial dreams and goals! 1.
Trading for excitement & thrill Not for profits.
Many traders consider stock market as casino and trade for thrill and fun only. As soon as one has a losing trade, he wants to quickly make back the lost money. He thinks about the other things he could have done with the money, regret taking the trade and want to recover as quickly as possible. This in turn leads to further mistakes. Be patient and wait for the next high probability opportunity. Don't rush back in.
Many individuals who have remained highly successful in other business ventures have failed miserably in trading game. Because they have a fairly big ego and thought they couldn't fail. Their egos become their downfall because they can not except that they would be wrong and refuse to get out of bad trades. Once again, whoever or wherever has any one come from does not concern the markets. All the charm, powers of persuasion, number of degrees & diplomas of business management on the wall or business savvy will not budge the market when you are wrong.
3. Three 4-letter words that will kill you! HOPE--WISH--FEAR--PRAY
If you ever find yourself doing one or more of the above while in a trade then you are in big trouble! Markets has own system of moving up & down. All the hoping, wishing and praying or being fearful in the world is not going to turn a losing trade into a winning one. When you are wrong just use a simple 4-letter word to correct the situation-GET OUT!
4. Trading with money you can't afford to lose.
One of the greatest obstacles to successful trading is using money that you really can't afford to lose. Examples of this would be money that is supposed to be used in any other business, money to be paid for college/school fee, trading with borrowed money etc. Ultimately what happens is that when someone knows in the back of their mind that they are risking the money they can not afford to lose, they trade out of fear and emotion versus logic and no emotion. If you are in this situation It is highly recommend that you stop trading until you earn enough to put into an account that you truly can afford to lose without causing major financial setbacks.
Research and learn to apply the best methods for placing protective stoploss orders. but for the next 10 trades? Before I enter a trade. Every trader needs to develop a method for getting out of losing trades quickly. when to buy and how much to buy.
9. Give them room to move and give them time to move. A great trader is not someone who has never had a loss. There simply cannot be any expectation of success if we can't answer these questions clearly and concisely. because this type of trade puts you in a highly euphoric state and leads to daydreaming about the huge profits still to come.
8. Not knowing how to get out of a losing
. With rare exception. but failing to take a small loss early will often result in being forced to take a large loss later.
If you consider yourself a trader. This can cause major problems however.
6. do I know when I will take profits? Do I know when I will get out if I am wrong? These questions form the first part of a trading strategy. Great traders have made many losses.5.
Nothing is more exciting then getting into a trade that blasts off and puts you into a highly profitable situation. not just for the next trade. Not Sticking to your plans &Changing strategies during market hours
If you find yourself changing your strategy during the day while the markets are still open. The simple remedy for this is to know where and how you will take profits once you enter the trade. After a series of losing trades. But what makes them great is their ability to recover quickly from a string of losses. Nobody likes to take a loss.
7. This causes you to not be pre pared to get out as the market reverses and wipes off all your profits because you have convinced yourself of the eventual outcome and will deny the reality of the situation. the most prudent thing to do is to plan your trading strategy before the market opens and then strictly stick to it during trading hours. The only way to recover from many (small) losing trades is to make sure the winning trades are much larger. be mindful of the fact that you are likely to be subject to emotional reactions of fear and greed. Let your profitable trades run. Not Cutting Losses or letting Profits run
One of the most common mistakes made by traders is that they let their losses grow too large. Spending profits before you make them. it becomes difficult to hold a winning trade because we fear that it will also turn into a loss. ask yourself these questions: Do I have a set of rules that tell me what to buy. The real problem occurs as you get caught up in the daydream and expectations.
It does what it does and when you are wrong you are wrong! The easiest way to keep a bad trade from going really bad is to determine before you get in. Once again they hope. It must be kept in mind that market does not care what you think. it is always advised to divide your Risk Capital (which you can afford to lose) into 10 equal Parts and at any given time none of your Single Trade should have more than 3 parts of your capital in it even if you are in a winning position.
It's amazing that most of the traders don't have any clear escape plan for getting out of a bad trade.
.trade. where you will get out. pray wish and rationalize their position. which may come any time. Falling in love with a stock (Just Flirt). It is because they have simply fallen in love with a stock to trade with. Such tendencies can be suicidal as for as trading is concerned. At the same time always keep some spare money for any Buying Opportunity.
10 Golden Successful
Rules for Trading!
The following are 10 most important rules which can turn you a consistent Winner if applied properly with discipline
1. Divide your Risk Capital in 10 Equal Parts.
Many traders get fascinated by just a stock or two and look for opportunities to trade in those stocks only ignoring the other profitable trading opportunities.
As part of the Successful money management. It may cost any one dearly.
Stocks are bought by anybody/ corporate/ financial institutions/ Mutual Funds to make profit on rise.
Many Traders get stuck with stocks for want of liquidity. Come Prepared with a Trading Plan
Successful traders always keep their Trading Plans ready before entering into any transactions. Because they love to see prices going up only. They have large holdings and mentally they wish and pray for the market to rise
. Successful trader would concentrate on the movement of those stocks only and enter the trade as soon as stock 'X' gives the anticipated breakout or stock 'Y' starts an upmove or stock 'Z' breaks the support level to initiate a trade for quick gains.
This is the most common mistake committed by Traders. traders should go beyond their Risk Capital. For example a Stock 'X' is on verge of a Bullish Breakout from any pattern or stock 'Y' has declined substantially after an initial sharp upmove or stock 'Z' is close to an important support level.2.
6. Trade ONLY in active & high Volume Stocks/ Futures.
More than 90% of common investors/ Traders are 'Bulls' by nature. Trade in 2 to 4 Stocks at a time with strict Stop Loss. Exit and Stop Loss.
5. As a Trader you know this fact but can you Buy 20 Stocks and try to make profit in all the 20 stocks just because all are moving up or vice versa in a Down trend? What will happen if market reverses without any indication on any bad news? Would you be able to monitor all your trades in such situation? Smart and Successful trader would trade in 2 to 4 stocks with strict Stop Loss and keep a strict vigil to avoid any misfortune in case of any eventuality. Sell Short as often as you go Long. most of the stock moves southwards. In low volume stocks the spread is too high and chance of Stop Loss limit getting failed is too high as there would be no Buyer or seller at your Stop Loss Level. One must prepare a Watch List or Probable candidates for Day's trading and remain focused on the movement of those stocks only. particularly after a Streak of winning Trades. This mistake generally not only wipes off all the profits.
In a Bull move. Always rely upon Stocks which have reasonably high volume over a period of time.
3. In order to remain in market while making consistent Profits. under no circumstances. High Volume are always advised for easy Entry. most of the stocks move up and similarly in any Bear Move. but puts traders in heavy losses.
or to reduce/enlarge holdings or whatever reason. Unlike other business your losses can be unlimited and rapid if market does not move as per your expectations. act on Charts. it may cause you double losses. you are 100% wrong. While you may be lucky if you have had made profits on such 'Tips' but there are 100% chances that you are likely to be trapped in sooner or later if trading on 'Tips' or 'Rumors' is part of your strategy. This is absolutely must for long term stability in the market. analysts.
10. Traders have large egos particularly after series of successful trades and their tendency to enlarge commitments in overconfidence may cause major financial set back. Normally such situation arrives after a sharp rise or decline when stocks are adjusting their values. They are always prepared to go 'Short' as often as they trade
Tips and Rumors are part of the game in Stock market. instead of putting your money at higher risk. Simply get out of the trade without changing your strategy during the market.
profits. because of their daily habits trade even when there are no signals to buy or short. 'Tips'/'Rumors' can ruin you sooner or laterDon't follow them. There is no second best option. Believe in Charts. So every stock that moves up will retrace back to 38%-50%-66%. unclear or doubtful.
. While some stocks attempt to move up. or other rumor mongers in the interest of any particular company well before their IPO's. Such situation are often confusing. Successful Traders know how to capitalize such correction.
The business of Trading is excellent as long as you are making profits. In most cases these are spread by vested interests through brokers. There is no harm in taking rest for a day or two or short period if the trend is choppy. History shows that Bull Phases have shorter duration that Bear phases.only. media. Always be flexible and accept the fact as soon as you realize that you are on wrong side of the trade. Since 90% investors are Bulls by heart they normally do not book profit at higher levels to re-enter later at lower levels instead they prefer to increase their portfolio at lower levels. few may be taking breather before next move. While in other businesses you may have other remedial measures available but in trading it is you only who has to control it. Don't Trade if you are not Clear.
8.on 'Long' side. There fore it is must that trader must take a portion of the profit and put it in separate account. Don't expect Profit on Every Trade.
If you consider you are a smart trader who can make profit on every trade. But instead of relying on Charts which are the translated copy of Price Action of any scrip based on demand supply. But facts are different.