Mistakes of stock market traders

Interesting and informative article

"7 Big Trading Mistakes"
The following is a list of things you want to avoid at all costs. Anyone of them can literally destroy your financial dreams and goals! 1. Trading with money you can't afford to lose One of the greatest obstacles to successful trading is using money that you really can't afford to lose. Examples of this would be money that is supposed to be used to pay the mortgage, bills or your child's college tuition. This is sometimes referred to as "trading with scared money" and there is a very good reason for that. Ultimately what happens is that when someone knows in the back of their mind that they are risking the borrow money, they trade out of fear and emotion versus logic and no emotion. If you are in this situation we highly recommend that you stop trading until you earn enough to put into an account that you truly can afford to lose without causing major financial setbacks. 2. The need to be "certain" We all have the need to make sure that the trade we want to make is going to be a good one. Therefore we look for signs that will give us a confirmation to enter. This can come in several forms, for example… Tuning into any Busniess Channel or the Newspapers to give us news that our script is on the move or waiting for a couple of extra days to make sure that the script is really flying and just not on a false breakout. Other traders will get opinions from friends, family or broker. Others will wait for ten technical indicators to line up and give the "green light". All of these are okay to a point, however the big mistake to avoid is taking so much time that you let the trade take off without you. Interestingly, what ends up happening as a result of waiting too long is that you actually increase your risk. This is because as a script moves higher and higher there are fewer buyers left in the market and it can come tumbling down until more buyers step in. It is like a game of musical chairs; eventually someone gets caught without a chair. Traders who wait and wait and wait to make extra sure are usually the ones buying the top tick just before the stocks sells off. They then beat themselves up thinking they picked the wrong script. The thing to keep in mind is that there can be no absolute certainty in any given trade. All we ever can do is take a very educated risk along with a leap of faith!
3. Words that will kill you! HOPE---WISH---PRAY If you ever find yourself doing one or more of the above while in a trade then you are in big trouble! As We have already said, the market doesn't give a damn. All the hoping, wishing and praying in the world is not going to turn a losing trade into a winning one. When you are wrong just use a simple 4-letter word to correct the situation-SELL! 4. Not Acting on your plan A big source of trouble arises when a trader starts to deviate from their strategy. Maybe for a week they will trade according to one set of rules and the next use something entirely different. You must never deviate from your methodology once you start. As long as it is a good one statistically there is absolutely no reason to change it. The way to make money from it is to trade it over and over again to exploit the edge it gives you. 5. Not knowing how to get out of a losing trade It's amazing how many people we have talked to who don't have any clear escape plan for getting out of a bad trade. Once again they hope, pray wish and rationalize their position. As we keep saying the market does not care what you think. It does what it does and when you are wrong you are wrong! The easiest way to keep a bad trade from going really bad is to determine before you get in, where you will get out. 6. Having an ego We have seen a number of individuals enter the trading game that were extremely successful in other business ventures. Because of this they had a fairly big ego and thought they couldn't fail. Their egos became their downfall because they couldn't except that they were wrong and refused to bail out of bad trades. Once again, whoever or wherever you came from does not concern the markets. All the charm, powers of persuasion, number of diplomas or business savvy will not budge the market when you are wrong. 7. Falling in love with a sector or script Numbers of people are always involved with a particular sector or a script. And they are of the view that this sector or script always proves Lucky for them. And they love trading in that script without managing any risk. They are so much confidant that their every trade in that particular script will always result in to a winning or successful trade. But ………… To avoid the situation after but…, never fall in love with a particular sector or stock, It can cost you dearly! Note: If you have any question regarding this letter please email us at info@fortunatemangement.co.in. And if you have any comments or suggestions please inform us. We will highly appreciate your suggestions and comments. Disclaimer: Trading in Stock Exchange is not suitable for everyone. Past Performance is not indicative of Future Result.