Common Reason for Losing money by most of traders is , We make money is 3-4 trades but lose it all in next 1-2 trades. Trying to be in trade all the time is one of the main reason of not being a profitable trader. Most of the trades want to take part in all market moves and if they get correct 2-3 moves they become overconfident and start going easy on their trading discipline and lose all or majority of profit. The viscous cycle keep on repeating again and again.
The most important trait a trader needs to develop is to know when to be in market and when t be out. There are times that we need to sit on the sidelines as the markets may not doing what we anticipate. This could occur because the markets are moving sideways as in current scenario, Nifty is stuck in 200 point range from past few sessions.
Why traders suffers from Need to Be In a Trade
Sometimes traders have trade paralysis — meaning they should have taken the trade but didn’t because they fear being wrong. Case in Point, Just dial we have discussed today morning , Just dial hit the SL on short side and Did all 3 target on Long side. Most of traders after it Hit SL in morning trade were not able to take the trade on Long side as they had fear of going wrong again. In other words, they have succumbed to the internal fear of being wrong. If the reason a trade was not entered was because the trader felt fear of being wrong, this points to an internal belief that needs to be addressed. Why is being right so important?
Quite frankly, there is no being right or wrong when trading. The market either moves in the trade’s direction or it doesn’t. Traders cannot allow the fear of being wrong to dictate whether they should be in the trade. Instead, they should accept that anything can happen once they enter. If the trade setup conditions were met, they must take the trade and follow through unless the conditions change and an exit is identified.
For example, if you are going through a drawdown period and are frustrated, why not trade the cash market, till you get comfortable.This way you can build up your confidence without being afraid of losing a lot of money.
Finally, the real reason to sit on the sidelines is when your trading system are not showing a valid entry but your emotion/gut feel says NO I NEED TO TRADE. Discipline is essential in these cases because traders tend to get bored. Out of boredom, sometimes frustration, traders will disregard their trading plan and jump into a bad trade. In these cases, traders need to remember that sometimes NOT being in a trade is also part of the job.
Trading is about choosing the right trade that has the best potential for working in your favor.