Top 10 common trading mistakes by local traders
Had read up on a good article on Top 10 common trading mistakes by local traders.
as there are word limit, i can only paste partial of the article and if your interested, you can read up on http://singaporehumblestock.com/top-10-common-trading-mistakes/
**Top 10 common trading mistakes by local traders**
Did you get caught in the recent volatile Price movement of Rowsley in July? Tried catching the bottom but ended up having a big hole in your wallet? Want to avoid such mistakes in future? A similar event also happened in Best World.
And we, Kelwin and Roy, have listed out the Top 10 common trading mistakes which we observed from our clients over the years. Why is this important? Because such events will happen again and Will YOU be able to benefit from it?
So here are the Top 10 common trading mistakes that we often observed:
<<1. Trading without a Trade Plan>>
Clique as it sounds but when you fail to plan, you plan to fail.
This is a common trait we find in many of our clients from our years of observation. Very often they will go into a trade without any trade plan ie ENTRY PRICE , STOP LOSS and PROFIT TARGET .
Most would rush in because the stock has suddenly moved up, but when the stock suddenly comes to a grinding halt and moves down, panic sets in and doubt starts to arise. Hope starts to fill their emotion and stop loss become a no no to them at this point.
Trading without a Trade Plan is like walking in the wildness and hoping to come out alive. Well, only a few do survive and live to tell the tale while most get crawled by the bears and bitten by the snakes and barely make it out alive.
“So in short, HAVE a TRADE PLAN and trade what you plan and don’t go off course.”
<<2. Trying to Find the Holy Grail of Trading>>
Truth be told, We also would like to find the holy grail in trading. Want the brutal and honest truth? There isn’t!! If anyone claims he has it, Let us know, We also want to know. Good things must share!
We always hear this regret from our clients lamenting that they have spent thousands of dollars attending different courses out there, but still losing money trading the market.
Many retail traders often jump from one strategy to another. When the strategy they just learnt do not make them money on their trades they give up and try something new or attend another course ploughing thousands of dollars with the hope of finding that holy grail
“We suggest traders should find a method that suits them and keep working and refining that strategy while having stop loss to manage their risks.
Successful traders are Masters of their trading strategies. And often they use only 1 or 2 trading strategies which they are comfortable with.”
<<3. Letting the losses run>>
We have seen many good traders drop out of the trading game, due to big losses. These big losses could be attributed to either
1 Not cutting the losses in time and letting their losses run
2 Being complacent with a few winning trades and not wanting to cut loss because you know it all.
3 Trading too big Quantity for their Trades (which we will talk later in the points below)
“Successful traders are discipline in their cut loss, they will exit a trade once it hit their stop loss levels before proceeding to ask themselves what went wrong with the trade (e.g what news is causing the stock to go against them etc). This is important as they know that capital preservation is crucial to staying in the trading game and one big loss is all it takes to wipe out their trading capital. They are comfortable in cutting small losses and reposition themselves again in their next trade.”
<<4. Trading too big a size beyond one’s comfortable level>>
Very often we observed that some clients will use the same lot size for all their trades without regards for their stop loss level from their entry price and they only realised the magnitude of their losses when they exited their trades.
For instance assume same trade size, a trade setup with a 10 cents stop loss, will potentially incur double the loss amount, compared to a trade setup with a 5 cents stop loss.
With just a few bad trades, some could incur huge losses due to trading too large Quantity of shares per trade.
“To avoid such mistake, one should first determine the amount he is prepared to risk (loss) for each trade, then determine the entry and stop loss price for the trade. With this 3 variables determined, the trader can then determine the Quantity of shares he should enter using a simple formula.
This useful formula is often shared in our regular client seminars, so do sign up and open a trading account with us, if you would like to be educated on how to use this simple and useful formula.”
