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ROCKFORT:The Top 5 Day Trading Mistakes I’m Glad I Made

來源:ROCKFORT 2019-12-05 10:06:37

Here are just five of the many mistakes I made during my trading career and all of them, without exception, c

Here are just five of the many mistakes I made during my trading career and

all of them, without exception, cost me money. I made many more, but I will just

concentrate on the ones I think other traders will benefit from.So, I lost money

but Im glad these mistakes happened as I eventually recognized the tactical and

emotional errors I was making and rectified them. I now avoid sabotaging my own

trades due to these common errors. In the short-term it was a painful and costly

lesson, in the long-term I retrospectively look at it as a down payment on

future returns.

While no one likes to admit they are wrong, its human nature, it is an

important part of the process to becoming a better and more profitable

trader.

So herein no particular order my mea culpa – my five top day trading

mistakes.

The

Not Using Stop Losses

This one was a real account killer. When you enter any trade, you should

know both your target price and where the trade no longer works for you. Your

stop loss is there to make sure that your losses are manageable and within your

trading tolerance. In short, they are there to stop you from running up

excessive losses. If you keep hitting your stop losswhen you trade, you should

do two things immediately – check that your original trade price is correct and

not put on another trade until you are sure that you want that position at that

price.

Secondly you should reduce your trade size until you return to consistently

profitable trading, building both your confidence and your account. If you dont

use stop losses, one trade could potentially wipe you out or lead to severe

losses from which it can take a long time to recover. And dont use mental stop

losses – a number you have in your head where you will exit a trade – they dont

work, and I know that for a fact.Stop losses helped to preserve my P&L when

trades went against me and kept me in the market.

The

Failing to Prepare Correctly

This starts before you open your trading account for the day. You need to

be ‘in a good place’ and not tired, upset, distracted or emotional. It was easy

to open my computer, sit down with a coffee and just start trading, however I

felt or unprepared I was. Trading is a profession and needs to be treated as

such. Before you open your account, write down in your trading journal how you

feel and make and honest appraisal that you are confident and good to go before

you start.

Review your trading journal on a regular basis – if you are trading when

distracted for any reason it will show up on the right-hand side of your

P&L. Trading financial markets is exciting and can lead people trade when

they are not correctly prepared. Dont worry about missing a trade, there are

plenty more of them on the horizon.

If you want to learn howto create a daily trading plan, we have recorded an

in-depth podcast to help you - How to Create a Trading Plan - Podcast

The

Letting Emotions Take Control

This one can get away from you quite quickly without you even recognising

that it is happening. During trading hours, I went through a range of emotions –

happy, sad, frustrated - without recognising them. For example, if I was

experiencing a bad run it was quite easy to start ‘forcing trades’ to try and

re-coup losses when under normal circumstances I would have left the trade

set-up alone.

On the other side of the coin, when I was experiencing a good run, I began

to feel invincible and I started pushing as I expected the run to continue. Both

are wrong.

Another well-known trading emotion is FOMO – Fear of Missing Out – when a

trader sees others making money on an asset and jumps in, without preparing, to

take advantage of the move. Momentum trading is fine when you have set-up

correctly but jumping on a move, especially one that you cannot explain, can be

fraught with danger. Dont panic and dive in, there is always another trade

around the corner. And dont get angry when the market is not moving the way you

expected it to. If you get angry you may start ‘revenge trading’ to get back at

the market. All that happens then is you will lose money.

Dont fight the market, go with the flow. Be in charge of your own

destiny.

What is FOMO in Trading? Characteristics of a FOMO Trader

The

Risk Management

If you dont manage your risk properly, however many winning trades you

make, you may still end up losing part of your trading capital. When I first

started trading it took me time to fully understand that it is not the number of

wining trades you make, it is the quality of them and your losses. No point

making £1500 in three trades if you lose £2000 on your fourth trade. You should

always set a risk-reward ratio when entering a trade – one unit of risk for two

units of reward should be your minimum ratio.

Leverage – putting down a certain percentage of the full value of your

trade - is another area that needs to be carefully monitored. If you

over-leverage your position, depending on your providers limits, then an adverse

move in any trade set-up can wipe out a large portion of your trading

account.

Leverage, if available, should be used very carefully. I could include stop

losses in this section, but they are important enough to have warranted a

section of their own.

What is Forex Risk Management? Learn the Basic

The

Overtrading

This applies to both the amount of trades you are doing and the number of

markets you are trading. Trading is fun, so the more you trade the more fun you

have, right? No, overtradingthe market happens when you lose patience - and

therefore discipline - and constantly trade because you feel that you need to be

in the market. In turn, you cant wait for the trade you really want.

Traders who only use short-time frames charts i.e. 5 mins, will try and

justify entering a trade by a very short-term move on a chart. Traders should

not feel forced to trade and only trade when all their parameters are met. I

recognized too late that constantly jumping between time frames on charts to try

and ‘justify’ my trading decision was wrong.

Overtrading the number of markets is slightly different as a trader will

spread himself/herself too thin across a wide range of asset markets. While

there is value to be found for traders watching and researching a range of

different asset classes, trading multiple markets is very difficult as it is

easy to lose concentration when trading one or more markets, leaving your trade

set-ups and risk management at risk. Tryto fully apply your focus on anything

you intend to trade.

For most people – well it was for me - it is ideal to only trade 1-3

markets at any one time, so they can spendtheir free time researching other

asset markets they are interested in.

If you are new to the foreign exchange market and would like to know more,

we have recorded a podcast to guide you through the one of the worlds most

liquid trading markets.

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