The Key To Success Through Error
Many novice and emerging stock traders charge full turnover in markets with high expected returns, but quickly realize that making money is consistently not as easy as they expected. For some, this awareness can be quite discouraging, especially because there are few persecution that fuel human emotions as much as trade. Prospects of making money often lure people into the trading arena, but the reality of losing money can be a quick deterrent.
In truth, the majority of professional traders of Wall Street made a lot of trading errors, according to trade experts. The key to their eventual success is that professionals examine their mistakes and learn how to minimize them. “If you don’t make mistakes, you don’t learn. But it is absolutely unacceptable to repeat these mistakes”, — said Dr. Alexander Elder, a psychiatrist and author of the book «Come Into My Trading Room».
Here they are, the most common mistakes made by active exchange traders:
1. Little Preparation, Training Or Lack Of Specialization
When you enter the market arena, you better be ready. However, few traders perform the necessary due diligence before moving to the markets, as evidenced by Robert Diehl, CEO and trade strategist. «If you’re going to swim with sharks, you’d better learn from sharks», says Diehl. «The market – a food chain – big fish eats the small fish». You should not underestimate the time, dedication and commitment that are necessary for a successful trader. You can’t just enter the market with a handful of money and expect to take money away from professionals. If that’s the case, you’re gambling, and not trading.
Many people are attracted to the trade because they think it’s an easy way to make money. However, there are several species of markets. For aspiring traders, it may seem difficult to study the characteristics of each species. Therefore, it is often useful to specialize. When emerging traders do not initially specialize in a segment of markets, they may be susceptible to being over-involved in any segment of the hot market. Successful trading requires time, so it is very useful to be loyal to a particular category.
2. Anticipate Profit Or Be Too Emotional In Money
According to professionals, the reason that many novice traders are not able to consistently turn a profit, related to their perception of money. No one can properly prepare a trader for emotional slides in the market. Many fear being branded losers. Fortunately, there are ways to reduce the sensitivity of emotional connection to money. For example, working in the market in smaller volumes. Trading in smaller quantities can help minimize both the losses and emotional difficulties that often arise with losing large capital. Over time, as the trader becomes more successful, experts suggest slowly increasing the size of the stake – without raising blood pressure – until a personal comfort zone is reached.
Most traders do not want to admit that trade can turn against them. They enter the market believing they will be successful by refusing to look in the rear-view mirror. Also, frequently emerging traders use the calculator to predict how much they will make and how they will spend unrealized profits. It’s dangerous to anticipate how much you’ll do in advance. Remember: the market you do not care. Going to Market with a neutral attitude is a good approach.
3. The Absence Of Accounting
It ‘s clear why traders get emotional when trading. By the very nature of buying and selling strangers give you money or take it away, and it can be very tense. To help bring these emotions under control, you need to keep a trade diary. Every time you enter a deal, write down why you entered the deal, whether it ‘s a fundamental side, a technical or a clue. The diary helps you achieve two goals. The first is to make money. The second is to become the best trader. Capital management and documentation are even more important than technical analysis.
4. Blind Tracking Of Mechanical Systems And Incorrect Timing
A large percentage of traders use technology – in the form of online trading platforms that provide tools for mapping, research and back-testing – to help them improve their strategies. Computer and software can provide important information about the technical and fundamental characteristics of the stocks. Yet many traders make a common mistake by relying too much on these tools without a full understanding of their capabilities. People think that the computer replaces what is between the ears. If you blindly follow mechanical systems to buy and sell, it is likely that you are unsure of exactly what you are doing.
For novice traders, there are often time errors. Quite often, a trader can have a good idea, but discovers that he had bought the asset at an inappropriate price. The timing of trade is never an exact science, but it is important for traders to recognize that there are times when it is reasonable to block profits or reduce losses.
5. Incorrect Placement Of Stop Orders And Does Not Calculate The Coefficient Of Reward For The Risk
Many traders misplace stop orders, forcing their positions to linger too soon and cannot make much profit. Typically, developing traders have to place stops according to a set percentage such as 2% of the deposit. How much a trader wants to lose depends on him or his risk propensity.
Many traders do not calculate the risk and reward ratio in trading before they establish a position. The risk and reward ratio is the relationship between an investor ‘s desire to retain capital at one end of the scale and the desire to maximize profits at the other end. Calculation of the profit targets and stop output to trade is often associated with many factors, such as the standard deviation or technical indicators, including Fibonnaci and Moving Averages. The coefficient of risk and reward shares may be different for each trader, based on personal preference or specific type of the trade. If you are going to risk the dollar, you should estimate that you can make 2.50$ or more before you make a deal.
Thus, each trader in the markets should take these mistakes into account and always strive to analyze them, after which draw conclusions in order not to repeat them again in the future.