What follows is a discussion of the behaviors, attitudes, and worldviews that will ultimately drain your bank account.
1. Trades are based on emotional decisions
Each trading position needs to have a rationale.
An expert trader's entry is predicated on hard, cold facts, while an amateur trader's reasoning is guided by gut instinct.
2. Stop loss placement is for losers
While trading, many traders never bother to set a stop loss. Remember that missing just one trade could be the end of your account.
3. Set unrealistic goals
Many novice traders believe that the size of their equity does not reflect their prospective profits. False inferences of many kinds can be drawn from such reasoning.
Anyone who opens a trading account with $100 and expects to buy a LaFerrari will quickly find that their money is gone.
4. No time for trade journaling
So why waste time on a trade journal?! The time spent on it is completely pointless.
Keep in mind that your trading log can serve as an invaluable educational resource. By constantly evaluating your choices, you can find the weaknesses in your plan and work to improve them, so maximizing your future benefits.
5. Trading plan is for fools
Many traders I know trade do it without any sort of plan in place.
Keep in mind that the trading plan will serve as your guide. Not having that makes it next to impossible to become a successful trader.
6. Blindly following other's view
Learning to trade entails studying the thought processes of successful traders to help guide your own decision-making. If you blindly follow them, without questioning or analyzing why, you will not only fail to learn from your actions, but you will also develop a dependency. When you lose, you blame the other team instead of yourself.
Your efforts will be fruitless if you take that tack.
Before blindly following any trader, you should train yourself to take responsibility for your own trading decisions and conduct your own analysis.
7. Who needs economic data
As we've talked about many times, the market is driven by what we call "fundamentals." If you don't pay attention to trends and the world situation and don't read the news, the market will always trick you.
8. Indicators are the magic pill
A lot of traders I know spend thousands of dollars trying to find a "magic indicator" that will make them a lot of money.
Indicators are just one of the tools in your toolbox. Its purpose is to add a few small clues to your analysis.
If you overestimate how important indicators are, you'll probably blow your account.
9. Not investing in education
Instead of investing in their expertise, many traders are shelling out cash for flashy trading aids like signal providers, robots, and indicators.
But the fact remains that education is the key to independence, and that knowledge alone is the key to freedom.
10. Back testing is pointless
Many traders who experiment with new approaches choose to forego the necessary back testing.
Keep in mind that back testing is the most reliable method for determining whether or not a plan is effective, and it may help you save both time and money.
11. Paper trading does not make any sense
The same applies to simulated trading on paper. Most traders jump right into real money trading without first trying out a demo account.
Demo trading, on the other hand, is the ideal, risk-free resource for gaining familiarity with the market.
These eleven myths and misconceptions are, sadly, widespread. Examine your trading habits and make sure you are not guilty of any of these common blunders.
What else would you include on that list?
Please use the comments box to ask me whatever you'd like.
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