No one likes to be wrong. When we enter into a trade, we want it to make
us a profit. Many times new traders will rationalize or even ignore
data that tells them that they are not in a good position, or that
they are about to see a loss because they do not want to admit they
were wrong.
As traders, you will not make winning trades all the time.
Eliminating large losses from your portfolio will increase our chances
for more profits. It is better and easier to overcome a small loss
than it is to overcome a large one. Traders need to remain objective
in the markets and your trades. We do this with proper planning before
an entry and remaining disciplined in your adherence to your trading
rules and plan. There are many more psychological pitfalls that you
need to be aware of to increase your chances of making more money in
trading. You can take online courses offering solutions to many of
these common ailments of traders. You can check out what they have to
offer and how you can fix your trader's mind as well as your trading
account.
One of the most popular styles of trading is trend following
especially in the Forex markets. Most experienced traders know how it
works. However, as easy as this method of trading is purported to be
you know, just jump in on the direction of the trend and you'll make
money , executing it is much more difficult. One of the challenges for
many traders focused on trends is recognizing when the trend is
changing and having the patience to wait for the retracements to enter
on a low risk basis. Below, we see a very nice uptrend in the
Eurodollar futures contract. Notice that in the entire uptrend, there
were only a few low risk buying opportunities which are highlighted
unless you have the stomach to sit through the pullbacks, and are
willing to give back some profits when the trend finally changes.
These trades offer the biggest reward for the lowest risk,
but keep in mind that you are buying in a downtrend and selling, or
shorting, into an ongoing uptrend. This strategy is also challenging
for many as it runs counter to every trading notion that has been
published or talked about in the trading community. At the end of the
day, you have to find the strategy that's right for you and only you.
It has to be in alignment with your available trading hours, risk
temperament, capital allocation, and financial goals. And lastly,
don't lose sight of what the essence of long-term profitability is:
Low risk, high probability, and high reward.
"Trading Mistakes" or trading myths might be:
Get back to even by doubling down on losers adding to a losing trade.
On a price action pattern, jump in early to make the most profit
Stops only take me out too early, it will always come back "big
mistake"
Big position size makes big money and can lose big money.
I can trade as many times a day as I want; the more I trade, the more
opportunities I have to make money Because the market is a unique
cultural phenomenon, it does not resonate with most accepted cultural
myths. So, for the most part, the filter or mental model that you have
will frequently conclude something inaccurate unless you re-program
the mental model that it came from.
That's why intelligent and educated people can succeed at any other
business and fail at investing because the usually effective life
model that works in the real world is not the same action that creates
price action. Thus to re program those unconscious beliefs or business
rules, we must begin to uncover the mental models that you use. You
must identify where they show up in daily trading; consider the above
example of overtrading that could stem from an unconscious belief
around taking advantage of every opportunity no matter how weak or non
existent the plan associated with the perceived "investment" is.
As a trader you need to make sure you have studied the market
you are trading. Risk management is much more then just placing trades
and using stop losses on those trades. Traders need to learn proper
charting techniques and how to read the trends in any given market.
You need to take less risky positions and lower the chances of losing
money. This is another part of risk management when you are investing.
When you have chosen a market to trade you need to know when the
news and economic releases are about to happen. Your positions can be
effected by these releases. knowing how a news release weather its bad
or good will greatly reduce the risk in your trades. Staying informed
on your particular market will make you money in the long run. Another
advantage you will have is if your trading platform has live news
releases. This can keep you current on the different markets. This is
more advantageous if you day trade or swing trade.
How to be profitable when trading stocks or
currencies
All possibilities aside, you should accept the fact that you
never really know the outcome of any of your trades but you should
always know exactly how you will enter the market and manage the trade
each and every time. Your consistency lies in your trading plan, not
in your daily results. Enforce discipline and go with the flow. Focus
on the execution, not the consequences, and just remember when enough
is enough. Make sure to use stop losses.
You should feel and truly understand that unemotional,
disciplined trading is the way forward, until an odd predicament comes
along to throw the trader off track: A string of losers. That's right,
it still happens even to the most seasoned professional traders.
Anyone who says that the pros never have losing streaks from time to
time is not a consistent trader in my opinion. In fact, we know from
experience that it is all down to odds and probabilities and anyone
can find themselves on the wrong side of the trade now and then this
inevitability is just the result of the chaos of nature itself and the
changing markets.
Traders will discover one day that they are just like everyone
else in the trading world and can easily lose money quickly if they
don't use stop losses. It is almost like we need to have the
experience for ourselves, just to believe it can actually happen.
Understand and accept right now that nobody can have winning trades
all of the time and when this concept is soundly grasped, it is then
and only then that a trader can cross the threshold to a consistently
profitable career in the forex or stock market.
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