Don’t act too early
Maybe you know those days, when you start with positive expectations and a big portion of optimism into the trading day. The news are good, the futures pre-market are in the green and some of your favourite stocks gained some points overnight. And you can’t wait to hear the opening bell.
And then the bell rings at 9:30 a.m. and a very volatile session begins. Your attitude is still very positive. You get excited and you search very hasty for good opportunities because you want to be in the move right from the beginning.
You buy two of your favourite stocks very quickly and you decide only by a short look at the chart. You fear to miss something.
But you can’t calm down now, there are so much more opportunities in the market. You buy another stock. Some company, you don’t even know the name, but it is on a move.
Around 10.00 a.m. you change your mind about two of your stocks and turn them around, but it doesn’t work and you turn them back after a short while. So far you haven’t lost much, but at 10:05 a.m. all of your stocks turn against you, the market behaves like it usually does during a normal reaction phase. But you discover that you didn’t calculate how much loss your stocks should be allowed to accumulate and what range you want to give them. You didn’t calculate Risk and a proper position size. Now you see that your positions break the rules of your Riskmanagement and that they could create too much loss in your account. So in order to avoid further losses, you sell two of your 3 stocks. You didn’t give them much range to work, but they lost.
When the market finally flattens, you too calm down and see that most of what you had done is worthless. You lost money, not to much, but enough to take most of your self-confidence for this day.
Even worse, during the day you discover, that one of the stocks you had to sell does quite well. But you went in too early and with a far to high position size in order to take short gains. You could have made some money this day, but only if you had waited for the market to confirm your judgement and if you had chosen a proper position size.
I think many beginners in trading will know days like that. I also had days like this. And I can tell you it is really annoying when you have to admit that your first judgement was right, but you weren’t able to take advantage out of it, because you broke your rules and acted too early.
It is easy to get hasty and do stupid things with your account, so try to stay relaxed, don’t get hectic and think before you act! The market will always suggest new opportunities and if you don´t stay focused and discisplined you will fall for them, so…..stay focused and disciplined.
Disclaimer: This site is for educational and informational purposes only. Nothing contained here should be construed by anyone as an invitation or solicitation to buy or sell any security. This site does not contain personalized legal, tax, investment, or financial advice. Users of this site should consult with a qualified adviser to obtain advice suited to their personal circumstances. Any links provided here to other web sites are for informational purposes only. We take no responsibility for the accuracy or content of linked sites.