All stock traders had their good and bad days. In my years of trading in stocks, index futures, commodities, and options, I would say that I made a lot of mistakes and therefore lose money or make profits lesser than what I am supposed to earn. The worst of all these was that I kept repeating my same mistakes again and again. I knew where I had gone wrong in my trading strategies. I would like to put up this blog post to share with you of my trading mistakes as well as to serve as a reminder to myself so that I will not repeat it. I look at financial speculation as a serious business and I am adamantly committed to this course to unlock the secrets of the stock markets. It is one thing to know the workings of the stock markets, and another to get rid of our natural habits that are not built for financial investment and speculation profession. We must work hard to improve our trading skills and accuracy as well as getting rid of the bad habits that is in-built in us that cause us to lose money in the long run.
5 Big Lessons that You Can Learn from my Trading Mistakes
- Exit stocks position and take profits too early.
- Too focused in short term market fluctuation rather than the longer term market outlook.
- Too much trading activities.
- Committing too much percentage of my trading capital in my initial trade entry.
- Allowing myself to lose money in a streak by refusing to walk away from the stock markets.
In my attempts to maximize profits, I became too smart. I try to outsmart the market by thinking that I can temporarily exit my profitable position during market correction or retracement. I said that I would buy back the shares when it reaches the market bottom. It sounds good and sounds wise too. But far from the truth of the matter, the stock market corrections usually seem to be very brief and suddenly the stocks prices gap up and shoot higher and higher. In my attempt to bring in more profits, I actually paid more trading commissions and also the loss of profit opportunity. It also increases my risks level because I have to buy back the shares at higher prices. On one occasion, I exited too early and see the stocks soars higher up to 10x of my entry level. Argghhh…..
Basically I always based my market outlook on the longer term stock market trends. I often look at stock charts using monthly, weekly and daily multiple time frames. Weekly and monthly candlesticks chart shows the primary direction of the stock market. It is also less susceptible to market noises. If you and I were to base purely of monthly and weekly stock chart prices, we could profit much from the longer term market trend. However, I do use hourly intraday chart for quicker action on fast moving markets like commodities and index futures. Nothing wrong with using hourly chart. It is just that most of the time, the longer term market trend based on the monthly chart or weekly chart takes precedence over the stock movement. The problem that I faced is that I am too focusing on market fluctuations rather than stock market trends. Instead of looking up to the stock market primary trend and riding the market waves, I constantly clear my profitable portfolio too early. I discovered that I was wrong but it was too late. Damaging to my wallet, it is. So, by not using longer term market outlook and combining it with multiple time frames as a confirmation indicator, I lose money and cut my profits away quickly. Argghhh…..
The following concept or advice is one of the most important pieces of stock market wisdom you might hear before. Do nothing but sit on your position. Yes. Idling can be the best action that you take. My problem is that I trade too often. It is my bad habit to get in and out of the market so frequently. That shows how immature I am. Most the money that I made was just doing nothing but holding on to my winning position. I have to tell myself repeatedly "Hold! Hold! Hold! Don’t exit your winning position yet." Again, and again, making the same mistake. I have to change my bad trading habits. Argghhh…..
Greed kills the fishes. That is why fishing works all the time. Decades after decades, fishes would bite the bait. The fishes never seem to learn. So are we in the world of financial markets. We are always the fool, the meal, and the dumb fishes. Oh, I forgot to tell you, no matter how many generations had passed, the fishes never learn from their parents on how to feed wisely without getting killed. I can’t blame the fishes because it is just an instinct. So are we. I often commit more than I should in my initial trade only to find out that the confirmation has not been given after a trading signal had triggered. As long as there is no confirmation, the trading signal can be void and the prevailing trend resumes its course. "Ben, you better remember not to over trade. Wait for confirmation for the chart patterns. How many times it catches you just like the fishes?" Argghhh…..
Sometimes, personal cycles of ebb and flow set in. Like it or not, someday isn’t made to be your day. You can use all the techniques you know and proven before, it just doesn’t want to work. The same goes for the stock market. As in the case of Mercury retrograde from the geocentric perspective, sometimes technical analysis signal just fails outright. So, whenever I had a string of continuous losses, I told myself to stop trading for a day or two. This is the technique I devised to cut down the effect of personal ebbs and flows that surround us. Some other people called this luck factor. Whatever you call it, just remember to stop trading when you have a streak of losses. Break the pattern of losing in stock market just as what Anthony Robbins teaches about habits and breaking disempowering belief system. My failure to walk away from the stock market always causes me more than what I am willing to pay. Argghhh…..
It is not the techniques of analyzing the stock markets that I lacked but the good trading habits that are lacking in most if not all traders and investors. That is why 80% to 95% of the investors and speculators are losing money in the stock markets. People like fishes aren’t built to trade in the financial markets. Greed is like baits that draw the fishes to the hook. Nevertheless, losses are good for traders because it shapes them to be a better one. Just like what was said in the Bible, that it was easy to take the Israel out of Egypt but it was hard to take Egypt out of Israel. Think about this. You might be focusing on the wrong learning path. Many people focus on the stock picking techniques and market timing methods but only few are focusing on money management and the habits of a better stock trader. I promised myself to be a better and wiser investor and speculator. See you at the top.