Tuesday, November 15, 2016

The worst mistake any trader can make

I've written many articles about trading. In fact I wrote an article a few years ago about the top 6 biggest mistakes you can make as a trader. Oddly enough I left one mistake out, a big one too, and to be true I have been guilty of doing it as well a few times. At the time I guess I wasn't thinking about it when I compiled the list. But we all learn (hopefully) from our mistakes, and the biggest one I found in my trading career so far has been the 'set and forget' strategy. Not monitoring your open trades is by far the biggest mistake you can make as a trader of equities, commodities or anything you can trade really. Thinking that a particular trade will 'go as planned' on a certain time frame will often result in a loss. There have been many instances when I was in a profitable trade, but didn't close the trade in time (often because the set 'target' was set just above or below the profitable trade). If I would have closely monitored the trade I could have seen that the trade was just about to hit my profit target and I could've closed the trade manually, minimizing my loss or taking profit just before the trade went south.

This mainly applies to short term trading, although it's a good idea to always check your portfolio every day, no matter which time frame you are trading on. What if you have several trades open at a time, are you supposed to monitor every single trade? Yes! That's what makes trading so exhausting sometimes. Don't step away from any open trades. There surely have been success stories about people closing successful trades that they weren't even watching for a long time, but this scenario rarely happens. It sounds amazing, making money while you sleep - but unfortunately we don't live in a perfect world like that. Successful traders need a set of rules in order to make money, and monitoring all your open trades should definitely be one of them!

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