My OperaDay trading tips Futures Trading Tips: Avoid Losses By Remaining Patient
Sunday, October 3, 2010 7:49:59 AM
Trading accounts are blown out everyday because of basic human warning signs being overlooked. If traders would only listen to their natural instincts they would more often than not keep themselves out of trouble. The only real principles a profitable trader should rely on are the simple ones.
Patience is one of the key ideas that many retail traders often ignore. Many feel as though they don't need to exercise patience in today's modern markets because there are so many instruments to trade that somewhere, sometime, something has to be moving. Unfortunately, this couldn't be further from the truth. Now, more than ever, successful traders need patience on their sides. Without it they will continue to find themselves on the wrong sides of trades. So what are the main ways a lack of patience can have a negative effect on trading?
Getting In Too Early
Jumping into the market before your level has traded is a common mistake amongst newer traders. They see a certain level trade and even though their rules or plan told them to wait for the market to show its hand the pressure mounts and they simply can't hold back any longer. Fear of missing the move means they jump in too early. What happens next is the market does exactly what they thought it was going to do but now instead of being up in a trade they are put under the pump because price is moving towards their stop. They end up either stopped out or panicking when price returns to their entry level and quickly cut their trade even though they were correct in their market analysis.
Getting In Too Late
Just because you don't want to jump the gun doesn't mean you should wait forever to enter your trade. 9/10 amateur traders will paralyze themselves with fear and over analysis. You have a system and you have a plan. You need to stick with that plan and have the confidence and conviction to pull the trigger when you see a trade setting up. Waiting too long only to see the edge you had pass you by can be one of the most frustrating aspects of trading. Don't let it happen to you. Be patient but act swiftly.
Holding On Too Long
Just because you are in a trade doesn't mean you get to relax. Now is the most crucial time for intelligent traders. Retail traders operate under the false premise that trade entry is the most important part of any trade. Nothing could be further from the truth. Trade management is what will separate a profitable trader from a market donor every single time. Professional traders have their targets in place before the trade is initiated. They then monitor the trade throughout the move and adjust stops and risk accordingly and when price reaches their target level they are smart enough to take profits and look for the next set up. Retail traders think a winning trade can turn into a monster winning trade. They lack confidence in their ability to repeat the process of finding another winning trade and that forces them to hold on in the "HOPE" that the move continues. Hope is a four letter word in trading and almost always leads to account draw-downs.
Having patience and knowing how to operate patiently inside the markets will increase your potential earning power as a trader. Work on following your rules and allowing the market to come to you before committing any capital. If you have a solid strategy and a well though out plan the profits will soon follow.
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