8 Things I Wish I Knew When Getting Started

24 בנוב׳ 2023

Here are some insights I've gathered over the years of trading experience

1. Position Sizing: A common issue for traders stems from taking positions that are too large. Emotional decision-making often takes over when you see your account balance decreasing. I've observed traders exiting trades prematurely to free up capital for what they perceive as a 'better opportunity'. Ideally, you should trade as if each share counts significantly. Emotion-driven decisions tend to lead to poor outcomes. While your goal is to make a profit, it's crucial to balance this with not trading from a place of fear.

2. Avoiding FOMO: The fear of missing out (FOMO) has led to the downfall of many trading accounts. We've all experienced moments of witnessing a stock, like CLOV, suddenly gaining traction in trading forums or chat rooms. The natural reaction might be to join in hastily, often abandoning solid trades for the allure of rapid gains. However, this usually leads to frustration as the market can quickly change direction. My advice is to steer clear of FOMO; assess trades on their merits rather than the hype.

3. Exit Strategy: One of the most common queries is about when to exit a trade. New traders often take profits too early and hold onto losing positions for too long. My key piece of advice is to focus on technical analysis rather than your current profit or loss. I exit a trade when the initial conditions that led me to enter it change. This approach requires a shift in mindset from profit/loss consideration to technical analysis. Interestingly, many experienced day traders prefer mental stops over hard stops, though they require experience and skill.

4. Journaling: Keeping a detailed record of your trades, whether through software or manually, is vital. This practice helps in analyzing your strengths and weaknesses. Understanding patterns in your trading, like the time of day when you're most successful or which types of trades work best for you, is crucial for improvement.

5. Buying Strategy: The common wisdom of 'Buy Low - Sell High' doesn't always hold. Sometimes, it's more effective to 'Buy High - Sell Higher', especially in the context of strong bullish momentum. Joining a trend can often be more profitable than waiting for the perfect low entry point.

6. Market Predictions: Avoid the trap of trying to predict market tops and bottoms. Following technical analysis is more reliable than going with gut feelings or trying to time the market.

7. Market Understanding: No one, not even economists, can claim complete market understanding. Trading based on market speculation or biases can lead to poor decision-making. Focus on the present market conditions.

8. Knowledge is Key: Lastly, don't trade what you don't understand. This seems straightforward, but many traders enter markets or trades without fully grasping the mechanisms at play, often leading to unnecessary losses. Understanding is crucial, especially in more complex trades like options.

These insights are drawn from my experiences and observations in the trading world.

Regards,