4. Win Small Loss Big
A very common mistake among traders is taking small profits and letting losses run. This is often the result of not having a trade plan. After one or two losing trades, you are very likely to take a small profit on the next trade even though that trade could have turned into a large winner that would have offset all your losses. As seen in above chart of Bajaj Finance, A Traders has to just trail his position and huge rewards were waiting for him.
Always have a plan before you enter trade and stick to it, Will be uncomfortable but trading life starts whenwe move out of comfort zone.
6. Changing the Trade Plan Mid-Trade…
18 Dec was a very good Example How emotions can overpower you as a trader if you are not prepared for it.
During prime trading hours you are subject to emotional reactions of fear and greed much more than you are when the market is quiet.
Many Traders missed the opportunity of taking trade as per plan as they were just in shock seeing gap down and price moving up and recovering the gap.
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The best approach is to not change your trading strategy and Stick to the rules you have mastered and practiced and having the discipline to not change your trade plan afterwards.
7. Over Trading
Over trading happens after a period of choppy consolidation when you “know”that the market is going to do something or during volatile time as seen on 18 Dec when market are swinging wildly. You are so certain that this is going to be a really big move that you take excessive leverage. Already emotionally out of balance, all it takes is a couple of big moves against you and you are bust,account with washed again
You must have a hard and fast rule that you can risk no more than a certain percentage of your account balance on any trade regardless of how good the trade looks.
8. Failure to Take Profits from Your Account
Most of Traders I Know no more than 1% of all traders have a rule to take profits out of their account. (But, they are quick to put money into their accounts as their accounts levels drop to untradable levels). You can’t believe how often I see traders leaving profits in their accounts and go for the “big trade” — the one that will give them a real “killing” — which usually kills their profits.
When you make profits in the markets, take some money out and put it somewhere else. You, as all traders, will move in cycles. You will make some, lose some, make some, lose some. By taking money out of your account when you are profitable, you will not make the mistake of losing larger amounts of money when a down cycle begins.