Traders common mistake in SECOND YEAR of trading mcx, nse, forex

December 22nd, 2016 → 3:23 pm @

traders common mistake in second year of trading in mcx, nse, forex, comex

 

TRADERS COMMON MISTAKES – YEAR TWO

This is the continuation from previous blog “COMMON MISTAKES – FIRST YEAR OF TRADING”.

If traders manage to pass through their first year of trading without losing all their money, most will enter their second year with unaware resolve and unnecessary confidence. In the first year of trading, most were no more than accidental traders; however, it's during the second year that they become a genuine danger to themselves. As they start to achieve a little knowledge about trading, or so they believe like that, second-year traders board upon a strong-minded campaign of self-destruction.

Likewise we grouped the common mistakes in three main category in our previous blog Common Mistake – First Year Of Trading, here is the continuation to second year.

1.                   Methodology

a.                   Believing what is read and heard

b.                  Falling into the prediction trap

c.                   Believing can pick tops and bottoms

d.                  Failing to see the trend

e.                  Failing to put stop loss

f.                    Taking profits too early

g.                   Failing to use a trade plan

h.                  Switching methodologies

i.                     Switching markets

j.                    Switching time frames

 

2.                   Money management

a.                   Overtrading

 

3.                   Psychology

a.                   Becoming addicted to the market

b.                  Being impatient

c.                   Having unrealistic expectations

d.                  Being a rationalist

 

1.                  Methodology

 

a.                   Believing what is read and heard

The common mistake traders make is to believe what they read or hear about trading from different sources. If it's written or said, most traders believe it must be true, only to find out later, when they lose money, that it's not. Traders want to believe it's true because it offers the line of least confrontation to easy money. Take care, the only thing that makes any trading idea true is your own validation, no others involved.

b.                  Falling into the prediction trap

Predictive analysis maintains that traders can predetermine market directions and turning points. New traders are fall in to believing it is possible consistently know where markets will lead. This is tempting because it holds out the confidence in trading by knowing when to buy low and when to sell high. Once again it provides a line of lease resistance to easy trading success, which is more fascinating to new traders.

In fact, most traders do not realize this predictive analysis may not be the most successful way to trade until it’s too late. It’s is not until they are poorer for the experience they begin to question the ideas presented by these analysis. Once they do, and begin confirming the analysis according to their own explanations, they quickly realize that the analysis, in their own hands will have negative influence in trading.

c.                   Believing can pick tops and bottoms

Majority of traders make regular mistake of looking to sell at tops and buy at bottoms. When a market makes a new all time high, inexperienced traders usually look to sell it. Selling what are supposed to be overvalued prices (picking tops) seems logical and smart, and to consider the opposite is unthinkable. Unfortunately, traders cannot help themselves and commonly make the mistake of buying extreme weakness and selling extreme strength.  

 

d.                  Failing to see the trend

Failing to see the trend is usually combined by the common mistakes we discussed previously. The end result is the same as traders attempt to go against the wind by trading against the underlying market trend. Even though, it's not that easy to define the trend, because it can vary' depending on the time frames used to identify setups (such as 5m, 15m, 30m, hourly, monthly, weekly, or daily) and trade plans (such as weekly, daily, or hourly).

e.                  Failing to put stop loss

If traders are lucky enough to trade with stop loss during the second year of trading, the common mistake is, most of traders are occasionally to move stops to avoid being taken out of trades. This movement is part of the fear of being proved wrong. The end result is that traders end up losing more money than if they had left the stop in its original position. Moving your stops makes you a bad loser and, therefore, a long-term loser!

f.                    Taking profits too early

As we discussed above, traders can fail to respect their stop loss by moving them further away. On the other side, traders are also scared that what profit they do have will be rushed away. This concern makes traders take their profits too early. Traders are not only bad losers, but they are also bad winners. Is it any wonder that most people fail at trading when they are so bad at implementing the two key meeting points with the markets, their stops and exits?

Being slow to takes losses and quick to take profits is the way to lose in trading. It takes many years of failure before traders come to realize successful and profitable trading lies in being quick to take losses and slow to bank profits!

g.                   Failing to use a trade plan

Most of traders make the common mistake of not trading with a clearly defined trading plan. They hardly ever trade with clearly defined and unmistakable rules to determine their entry level, stop level, and exit level.

h.                  Switching methodologies

I hesitate to call this a common mistake because, on time, it can be the right thing to do how else can you find out what works in trading if you don't go searching? However, I've added it here because many new traders change their trading methodologies before they have given a one thorough examination.  Traders can become too impatient during their search and don't take the time to know deep enough to conclude correctly whether a methodology has value.

i.                    Switching markets

If traders have failed to make money by switching methodologies and with the underlying common mistake what we discussed, many of them conclude that it is the market that is holding them back, rather than their approach to it, they will try to enter in new market without any proper home work and experience, this is ultimately the key risk factor for new comers.

j.                    Switching time frames

Many traders believe a switch in time frames will improve their results. They feel trading a lower time frame will reduce their risk and hence their losses. This usually leads them to try their hand at day trading. However, reducing the time frame does not reduce the risk. What traders usually do when they switch to a lower time frame like day trading, is accidently to get bet their risk and money management by closing losing positions at the close of business. Once again, it's not the time frame that is holding them back but their money management and methodology.

2.                   MONEY MANAGEMENT

 

a.                   Overtrading

In the second year of trading, most traders will have come across the concept of money management. Even though many might judge they recognize about money management, the reality is that they don't really. New traders will still overtrade, given their account size. That is, they will risk too much of their trading account on any individual trade.

3.    PSYCHOLOGY

a.       Becoming addicted to the market

The enthusiasm and thrills of trading gives traders a natural high. The adrenalin rush produces an unhealthy addiction to trading. Craving the next trade can cause traders to push marginal trades that don't exist, and they suffer the usual poor results.

b.      Being impatient

Many traders lose patience with the market. If this happens, when patience is required, they'll instead neglect their previous certainty to trade only authenticated setups. In a rush, traders will start executing any marginal opportunity and continue to lose.

 

c.       Having unrealistic expectations

Novice traders make the common mistake of believing the marketing hype surrounding trading, which creates unrealistic expectations. Expecting to earn a 100% (hundred percent) or more return places traders under huge pressure and feeds their descending twisting into financial and emotional self-destruction.

d.      Being a rationalist

Frequently, traders seek to explain away their losses. They always find a reason the market took their money. If the NSE or MCX or FOREX hadn't dropped last night I would have been able to take my profits this morning. How did I enter the trade in this level?. In the minds of novice traders, it's never their fault.

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 You can find some interesting links below, that will helpful in your trading

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  3. Technical analysis software, the real purpose is to make profit from trading FOREX, MCX, NSE, NCDEX

  4. Importance of Trading System in Future Trading in FOREX, MCX, NSE, COMEX

  5. Facts about Fudamental and Technical Analysis trading in Commodity, Stock, Currency Markets

  6. How to manage stress in day trading FOREX, MCX, NSE, COMEX with WinTrader Buy Sell Signal System

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  8. Getting started with day trading in MCX, NSE, FOREX from WinTrader Buy Sell Signal Software
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