3 Common Trading Pitfalls -- Plus 6 Free Lessons
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By Elliott Wave InternationalLong-term trading success depends on more than the right trading method: adequate capitalization, money management skills and emotional discipline are also vital.
Yet it isn't always easy to put your finger on which elements of trading success may cause you to struggle in the markets. Elliott Wave Junctures editor Jeffrey Kennedy shares some of his insights on what often gets in the way of trading success.
1. Inability to Admit FailureIt isn't easy to come to terms with our mistakes, yet, if you are serious about improving the quality of your trades, this is a vital step!
"Have you ever held on to a losing position, because you 'felt' that the market was going to come back in your favor? This behavior is the 'Inability to Admit Failure.' No one likes being wrong, and for traders, being wrong usually costs money. What I find interesting is that many of us would rather lose money than admit failure. I now know that being wrong is much less expensive than being hopeful."
2. Fear of Missing the Party
"This one is responsible for more losing trades than any other. Besides encouraging overtrading, this pitfall also causes you to get in too early. How many of us have gone short after a five-wave rally just to watch wave five extend?
The solution is to use a time filter, which is a fancy way of saying, wait a few bars before you start to dance. If a trade is worth taking, waiting for prices to confirm your analysis will not affect your profit that much. I would much rather miss an opportunity than suffer a loss, because there will always be another opportunity."
3. Systems Junkie
"My own biggest, baddest emotional monster was being the 'Systems Junkie.' Early in my career, I believed that I could make my millions if I had just the right system. I bought every newsletter, book and tape series that I could find. None of them worked.
I even went as far as becoming a professional analyst -- guaranteed success, or so I thought. Well, it didn't guarantee anything really. Analysis and trading are two separate skills; one is a skill of observation, the other is a skill of emotional control. Being an expert auto mechanic does not mean you can drive like an expert, much less win the Daytona 500."
What is one of the biggest obstacles to successful trading? According to Kennedy, it is lack of patience:
"Impatience stems more from a sense of not wanting to miss anything. And because we're afraid of missing the next big move, or perhaps because we want to pick up some lost ground, we act on less-than-ideal trade setups.Kennedy's advice on how to be patient is another important step towards improving the quality of your trades.
Another reason traders lack patience is boredom... as traders wait for these "textbook" Elliott wave patterns and ideal, high-confidence trade setups to occur, boredom sets in. Too often, we get itchy fingers and want to trade any chart pattern that comes along that looks even remotely like a high-confidence trade setup.
The first step in overcoming impatience is to consciously define the minimum requirements of an acceptable trade setup and vow to accept nothing less. Next, feel comfortable in knowing that the markets will be around tomorrow, next week, next year and beyond, so there is plenty of time to wait for the ideal opportunity. Remember, trading is not a race, and over-trading does little to improve your bottom line."
|If you are ready for the next steps on how to become a more successful technical trader, get Jeffrey Kennedy's free report, 6 Lessons to Help You Spot Trading Opportunities in Any Market.|
Jeffrey has taught thousands how to improve their trading through his online courses, his international speaking engagements, and in his new service Elliott Wave Junctures.
This free report includes 6 different lessons that you can apply to your charts immediately. Learn how to spot and act on trading opportunities in the markets you follow, starting now!
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