Trading in the stock market is thought to be an easy way of making lots of money. Well, it is far from truth! Actually, losing money is easy in trading. You may have read news that seemingly successful brokers looking like market wizards are responsible for destroying many accounts. This means that the trader with highest IQ or possessing exceptional skills in reading complicated charts can lose their money if they trade in undisciplined way.
Online trading forum platforms holds thread about how long-time undisciplined traders were hammered and forced to alter their approach.
Undisciplined trading habits to avoid
The first 30 minutes of day trading opening session is full of emotions as it is driven by aftereffect of previous day trade results and overnight movements in the global market. In this period even new traders are attracted in taking position that may be conflicting to real trends which are expected to emerge in the later part of the day.
Tip – Watch first half day session for patterns and breakouts like majority of experienced traders.
Fail to listen to market message
Market basically reacts against people’s expectation, especially when you ignore market message during the broadcast of significant news. People think they are smart but the market does not care for the trader and is not there to help. Never expect mercy but think about it as your money-eating machine, so it is necessary to protect yourselves.
Tip – Hear market message and verify it with charts. Go long at the closing hours, if patterns support and prices hold on consistent high level. Go short, if market gives up the high level and even patterns support down movement. This strategy is known as ‘tape watching’, which full time traders’ practice. If market environment seems choppy and oscillates within small range, then the message is to keep out.
Ignore market moods
Two market phases are trending where breakouts are bought or sold and trading where weakness is bought and strength is sold. If you ignore market moods then the chances of ending up in inappropriate market environment with the help of wrong indicator is obvious.
Tip – Never walk in the market like a blind man but feel the mood, support this swing with different technical indicators to confirm the market phase.
Flexibility is crucial for traders, when market gives unclear signals. Be ready to reduce position size, when market displays a counter trend. Market exposure must depend on market mood at a given point. For example, in such condition if you own 4,000 shares in Fortune futures then be flexible and decrease it to 1,000 shares.
Tip – You can still book partial profit the moment trade starts earning 2 to 3 times average risk you took.
Fail to treat each trade like another trade
Thinking that a specific situation will certainly bring profits and indulging in taking risks more than normal level is bad. Each trade is similar, so expect normal profits, all the time.
Tip – Supernormal gains are rare kind of bonus but don’t expect it. Never increase risk unless your equity has grown sufficiently to cover that risk.
Successful traders are well aware that profits are not always easy to earn. They reached to this level with training from other traders and constantly tried to enhance their skills and strategies including charting skills, money management skills and position sizing. They take a break in choppy or volatile market environment.