Awareness is the primary step towards development and that is why I am sharing with you this typical journey of a beginner stock trader. This will help you to develop an inherent understanding of the major pitfalls of trading which you should realize very early. Making mistakes is never the problem but when mistakes are made repeatedly, faulty and unprofitable habits are formed. The more bad behavior you can exclude from your trading, the better it gets.
Typical Journey of a Beginner Stock Trader
I finished reading a book on technical analysis and attended a couple of paid seminars. Now I know what to do. I will just start making money from Monday. Can’t wait. Don’t know why this weekend is so long. I will rock in the market.
I am shocked. This moving average worked so fine in my testing but did not work in my first trade. Let me change the parameter. Now it should work.
No way, this moving average is not just work the way the trainer demonstrated in the seminar. I am getting a lot of whipsaws. I think I need to add one more indicator like RSI or MACD.
This is still not working. I lost in 8 out of 10 trades. I can not handle volatility and can not afford wide stop losses. So, Let me change the time-frame from Daily to 30 minute.
Oh No ! I did 20 trades and 17 resulted in losses. Maybe this was not my week. And, I could have made so much but I missed all the good trades since I was in meeting with my boss.
Oh now I know, I forgot to notice the triangle. Next time, I will focus on patterns also.
I am missing good trades. The trading signals on my chart are not aligned well. By the time I take notice, market already makes a move and I do not want to chase the market because that would spoil by risk-reward ratio. I need a paid charting platform.
My new paid trading platform looks so good and I also boasted in front my trader friends and they all feel that I have graduated to the next level.
Damn ! I am still unable to avoid big losses and end up cashing out small profits.
I have lost a lot of money and confidence. I need to take a break, read more books and attend one more seminar by that new teacher. I have seen seen his Youtube videos and he is really good. Now I know what to focus on.
Oh No ! I am still losing money. Nothing works.
I think the only way to make money is through “Algo Trading”. These algo traders make all the money that poor guys like me lose. I have got to shift onto algo trading.
I just can’t believe that I have lost more money. Actually, trading is based on luck. But, I have to recover my money.
I lost more because in order to recover, I took bigger bets. I need to close my trading account anyhow.
Wait ! My friend just told me that he used supertrend indicator last month and made money. I should have talked to him when I started. Nevertheless, Let me give myself one more chance and use supertrend indicator.
Oh, I lost more money. Now, I have to postpone buying the car (can’t even buy a bike now).
And it goes on and on.
Just get out of this trap before it leads to emotional & financial loss as well as waste of time. There is no secret to making money from trading. There are many popular trading tools and indicators available but if you use them in the same way as they are used by everyone you will end up making losses just like majority of the people. Just use them in the correct way along with proper risk & money management instead of searching for a new indicator or a new trading system or a new algorithm that can make you rich.
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