“I’ll just hold on to this losing trade, it will start going my way soon, just one more trade and I’m out.” Does this sound familiar, it’s something most traders find themselves saying more than they should. This is a problem – over trading. Over trading is a problem for inexperienced traders and experienced as well.
Why can’t we stick to our plans we set forth? There are three main reasons and you should be aware of them.
Traders over trade for three reasons:
- GREED- Over trading is a problem for inexperienced and experienced traders as well. Many traders think that more is better. The more hits you throw one will eventually be a home run. The truth is that the only person making money from your over trading is your broker, not you.
Let’s say you just closed out a winning trade. You feel good, you followed your plan and made $$ profits. Great! go out and enjoy the rest of your day. But the market keeps going on without you. You cannot move let alone turn your computer off. You think, “I should have stayed in this trade,” so you jump right back in. At the end of the day, you gave back all the profits you just made. Greed makes you act without thinking.
- Revenge Trading. Revenge Trading?!! It may sound funny – but it is not. You just lost money on a trade. The market is mean. Your stop was taken out and now the market keeps moving in your direction. So you want to get back at the Market. You keep trading, thinking and hoping, “The next trade, I will make back the money I lost and more.” The urge for revenge makes no sense as the market doesn’t care about you. The market is not an enemy, it is a system. The only enemy you have is the enemy within you.
- Wanting To Be In A Trade. There are times in markets when there is nothing going on. Nothing moves. You wait and suddenly it creeps in – you just get the urge to be in something. You may think, “If I don’t trade, I won’t make any money!” Terrible decision. Trading out of boredom will land you to money loss, when there is nothing to trade. The best trade is no trade. You risk nothing.
If you want to be successful in trading around, you must have a trading journal and follow a good money management strategy plan. Another plan of action is to follow professional traders with experience who can guide and teach you trading skills, until you feel comfortable trading on your own. Think of it like using a street map or GPS, it will get you to your destination safely and on time. Why bother getting lost and frustrated when you don’t know how to get there? With a plan in place, you can be sure that you will be a consistent and profitable trader.