December 22nd, 2016 → 3:38 pm @ reacoms
COMMON MISTAKES IN TRADING (MCX, NSE, FOREX, COMEX) – YEAR THREE
Having a difficult journey in trading through the first year and survived the second year, those who get to the third year should be much admired for making it through. These traders usually step into their third year of trading with a strong minded resolve and battle weary carefulness.
Even though implementing the posturing of an expert trader, traders in their third year still have the possibility to be risky. They have more knowledge, or so they think, and believe that the markets be obliged them big time both financially for the money it has rented and for their time invested in unraveling its mystery. To cap it off, their egos have taken a huge battering. This is an explosive cocktail to carry around. Welcome to the third year of trading!
a. Failing to let go of what has been learned
b. Forgetting it's all about simple support and resistance
c. Confusing technical analysis with trading and failing to separate trade plans from setups
d. Failing to develop trade plans that support setups
e. Failing to understand positive expectancy
f. Failing to validate methodologies
a. Continuing to overtrade
a. Focusing on the profits and not the process
b. Having poor discipline
c. Believing markets are impossible
d. Believing there are trading secrets
e. Believing the greatest risk is losing money
f. Believing the hardest thing is psychology
Failing to let go of what has been learned is a major mistake that nearly every trader makes and there is almost no way to avoid it. This is due to that important element to success is determination. On the other hand, it's the only way to be successful in trading, because trading throws so many barriers in your path that without it you'll never progress. Yet determination can make you so stubborn that you won't walk away from a losing methodology, even though your trading account, your partner, and your accountant are telling you to.
In the chase of the crucial trading strategy, most of traders will be seduced into believing that difficulty is the trick to win in the markets. They believe that if everyone loses in the market, trading can't be simple if it were, wouldn't everyone be winning? They begin studying complicate and mysterious methodologies, looking to the stars and peeking under pyramids to find the "secret key" to unlock the markets. They lose sight of the simple truth that trading is all about identifying potential support and resistance levels.
Why would traders buy unless they believed the market may have found support? Why would traders sell unless they believed the market may have hit resistance? Unfortunately, in pursuit of "clever" trading, traders lose sight of the fact that trading is all about simple support and resistance levels.
In the initial part of their trading career, many traders confuse technical analysis with trading. They make the common mistake of not having a separate setup and trade plan. They're so focused on trading system’s price rather than its performance. A technical analysis system having poor performance will make you a total loser, so you must consider about only the performance of software. Rather than considering the price a technical analysis system can predict most accurate buy and sell entry points with proper targets and stop loss in easy way.
A good trade plan will require the setup to deliver positive market action before committing a trader to a position. For a sell setup, a good trade plan will demand lower prices before committing to a trade. For a buy setup, a good trade plan will demand higher prices before committing to a trade. Unfortunately, most fail to incorporate this "supporting" role into their trade plans.
Another common mistake is being ignorant of positive expectancy. Eventhogh people trade to make money and subconsciously want to make a great deal of it they have no practical knowledge of their actual expectancy. They don't know what they are likely to earn over the longer term for every investment they risk in trading.
Majority of traders, whether new or experienced, make the mistake of not correctly validating their methodologies. Some believe that a simulated equity curve and calculated expectancy, combined with paper trading, will validate their system. Unfortunately, this is not the case.
Most traders will only validate their methodologies by trading real money in the markets. If they make money, their methodologies are validated; if they lose, their systems are no good. However, the only way to validate your methodology correctly without risking money is to trade the market according to your rules.
This is one area that most traders struggle with early on in their trading career. Eventhough most of traders believe they understand money management, they still risk too much of their risk capital on each trade. They're not patient enough to take smaller bets to reduce their risk of ruin and sensibly build their account balance over time. Trading conservatively is just not exciting enough!
Focusing only on profits from trading does not make money in long term. Traders should be focusing on the process of trading, not the profits that is, focus on money management, identifying setups, and executing trade plans with best technical analysis software, here I suggest WinTrader, this is one of the best and accurate buy sell signal system and technical analysis software available in market. If you learn to focus on the process of trading, the profits will follow.
Poor discipline is another common mistake. Traders can get easily distracted when they play with their setups and trade plans, entering and placing stops in an almost random fashion.
If you're fortunate enough to still be trading by the third year and you're still losing, you'll be close to the end of your trading career. If so, you'll probably make the common mistake of believing that markets are impossible to trade.
Once you start thinking that markets are impossible to trade, you remember that a small group of traders do succeed and making consistent profit from trading in Currency, Commodity and Stock Market segments. This leads traders to believe this select group of winning traders must know trading secrets. It can be the only way they win. It's the only logical conclusion inexperienced traders can come to.
Another common mistake traders make is to believe the greatest risk in trading is losing money. However, the greatest risk you're exposed to in trading is interfering with a methodology that works. When faced with dullness, you'll need to ignore the temptation to modify your trading system to squeeze out extra profits.
By the end of a trader’s third year of trading career, struggling traders make the common mistake of believing that psychology is the strongest part of trading. After purchasing so many books and technical analysis and charting software programs and attending so many seminars and workshops, they believe they must have the knowledge to trade successfully. They know they are not stupid so they believe it mustn't be their trading knowledge that is letting them down but the application of it. They believe their psychology is their biggest hurdle. And this belief is reinforced when most trading books support the notion that psychology is a person's single greatest challenge to becoming a successful trader.
Now, although psychology is important, it isn't the greatest challenge to successful trading.
Hope you have come through the First Year, Second Year and Third Year of trading and got more details about common mistakes that supposed to make in the three years of trading. Once you get understand all the mistakes and change accordingly to get better trading career, you will become a professional successful trader.
Wish you all happy and successful trading career ahead.
This blog is a continuation from previous blogs mentioned below;
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