How even the best investors keep making the same mistakes over and over, resulting in huge losses that wipe out previous hard-earned gains.
Every time you lose money in a trade, think about the root cause of your loss and write it down. In fact, I think that you will continue to make most mistakes. It is suggested that you can mark them with orthographic characters, but as time goes by, the possibility of you repeating mistakes will decrease.
I think the one error you flagged repeatedly would be so prominent that you couldn't ignore it.
Here, I have summarized several frequently asked questions, some of which are my personal experience, and perhaps traders can ask themselves.
1. Am I conducting a consensus transaction?
Jumping into consensus trading is a classic mistake every investor makes at least once in his life. We are drawn into a compelling story, we give in to temptation, we become part of a group.
But a few days later, when it is found that everyone has turned bullish or bearish on the asset (whether it is gold, stocks or other assets). You've lost everything. Your trade returns -30%, and you get stopped out.
To avoid this, ask yourself if you are buying at the top of a saturated market, and if there is a sell-off, will it cause panic, the main focus, really, is the platform. If you open an order and enter the market at will without thinking clearly, you can only follow the trend.
2. The transaction is out of control, what should I do?
The answer to this question is obvious, but not many traders, especially short-term traders, can do it-stop trading.
Is there any other way? Traders can't control their own hands. I think it's normal. If you are forced to close a transaction by yourself, then the number of your open positions in the next transaction must be strictly limited.
For example, if you can open 100 lots in total, then try to open only 10 lots, and if you can make a profit, then you can continue to control these 10 lots. As long as there is a loss, close the position and go to sleep.
To be honest, when your mind is completely confused, you may not be able to stay awake with a light position, let alone a heavy position, so go to sleep.
3. Have you considered the worst case after opening a position?
Opening a position is always based on one reason or another. Most people, after placing an order, have already begun to fantasize about how the price will move in their ideal direction.
So what's the worst-case scenario? Have you thought about how to deal with extreme situations in the market? I think that for every transaction, at the very beginning, the first thing you have to consider is the worst case for yourself. If you don't think clearly, please don't open positions at will.
4. Why do I want to do this job?
Sometimes you have to say, "Why am I putting my hard-earned money into these crazy markets?" This simple, empathetic question can save you a fortune when you least expect it. sum of money. Maybe you entered a deal out of greed, boredom. But this is something that must be considered.
5. Do you worry about gains and losses?
Once entering a transaction, this mentality plagues most traders. While afraid of losses, they are also afraid of losing profits.
Whether you are bullish or bearish, people always have subjectivity. I think even if you are outside the market, you cannot be completely independent and objective.
Bullish, hit resistance, you still want to hold? Understandable, but obviously doing this is easy to make mistakes. When encountering resistance, closing the position is still the first choice. Maybe you can control the position a little bit, and wait for a breakthrough to recover the lost part.
Every time you prepare to trade, ask yourself frequently asked questions (the above are just a few). You'll be amazed at how easily you can expose your flaws, how quickly you realize how dangerous your cognitive biases are forcing you into a bad trade, and poor risk management can be.
But, most importantly, over time, you will learn how to become the gatekeeper of your capital, eliminating those stupid mistakes that cannot be avoided and will permanently lose your chance to become a stable and profitable trader.
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