Any individual who takes part in the budgetary markets is looked with the customary event of overseeing losing exchanges. Finding a harmony between limiting danger and furthermore enabling the market enough space to move to support you can be a precarious circumstance. Merchants are regularly advised to “cut misfortunes rapidly,” however tragically that isn’t a system that is effortlessly connected in reality – everybody sees “rapidly” in an unexpected way. In that light, here are fThe 5 Most Effective Ways to Quit Trading Stocks.
- You study and back test and decide to learn the behavior of just 3 stocks really well. You begin to trade these 3 stocks week, after week as they all are trading in a range bound manner and you get chopped up everyday, eroding your hard earned capital along the way. You buy at the top, and the stock falls again and again. You are convinced you have found support and you buy at the bottom, the stock moves higher then suddenly drops like a stone and you have a huge loss. You use oscilators like stochastics and Williams %R to find your entry points only to be whipsawed once again. Boy this is fun.
- You find a stock that has been in a fantastic uptrend for months and it finally has a down day. You decide to take a short position because you think the trend is over so you load up. The market opens down the next day but for some reason your stock hasn’t opened yet. Finally it opens up 2 points and breaks out to another new high and you have a huge loss.
- You find another stock in which you think the trend is going to end soon as it closes near the lows of the day. The next day an industry competitor announces better than expected earnings and the entire group gaps up higher on the open. The shorts are forced to say uncle as the groups continues higher into the lunch time session. Once again you close out your position with a huge loss. Are we having fun yet?
- You decide on trying a new strategy that you have watched and observed in the markets and have spent the last several weeks paper trading. You were disappointed with your last technique because everything you did seemed to go wrong. You lost some of your trading capital and more importantly, you lost your emotional capital and were spooked by every little move the markets made in either direction. So paper trading was your answer to get you back on the horse. Your new found strategy was based on being a counter trend trader and to be a buyer of gap reversals. So when a stock gapped down big you were going to be a buyer as it moved up in price. It was working great for you on Monday and Tuesday and you were making some good money so you decided to increase your size. On Wednesday when you found your play in the education stocks which were gapping down so you bought in as the stock started to move up, you bought some more you now had a position twice the size of your normal play.
Suddenly, there is no more trading in the stock, the stock has been halted so you scramble for any type of news and you find nothing. Ten minutes pass you read a report that doesn’t sound that bad so you think but the stock is still closed. 3 hours pass and you are into the afternoon session, the stock opens down 7 more points below where you bought it and you decide to cover half your position and take a big loss. Then the stock starts to rally and you are relieved it has moved up one and half points from its lows. The stock goes flat and you cover the rest of your position, to take the biggest loss in over a month. Once again, you close out your position with a huge loss. This is really getting to be miserable. I am a failure without a plan.
- You decide that in the interest of sanity, you are only going to trade stocks that are breaking out. You tried picking tops and you got hurt. You tried going counter trend and got whacked. You tried sticking to just a few names and the range bound market made you puke. So now its time for breakouts. You move to only buy gaps up stocks that are moving up in price. You spend some time studying the nuances of the software, afterall, this could be the holy grail. You might have stumbled upon the method used by the professionals that you heard make millions in the markets. You also realize that you need to know more, knowledge is good, right?
You understand that day trading stocks is hard work. You have become a seasoned pro at learning how to lose money in the stock market. You have tried all the various methods. You have used lots of different software programs with each one having some special feature but nothing has worked consistently. You just finished reading another great book about stocks and this one seemed to have all the answers but you just couldn’t figure out how to optimize and program the code. You decide that you need to learn computer programming. You buy a faster and more powerful computer, and you buy a well researched program called Trade Station.
You now have a new learning curve that must be mastered in order to program your new technique into the system. After many long nights and multiple calls to tech support, you have a clear understanding on how to use this product. You spend some time doing back tests and analyzing the best stocks to trade that will make you the most money over time. You set up the program, you make sure the system has all the indicators you have found to be really great even though you have seen multiple losses in the last few months. So now you at least have some kind of plan for your trading but do you believe that it will work?
If you don’t believe it than how can you trade it? The software looks really cool and the backtest results were favorable, I mean they look ed much better than I ever expected. I am sure I didn’t curve fit the data. So I start to trade the breakouts with modest success. I guess I have learned a few things along the way. The software charting package looks great and the names it discovers works sometimes and other times i get whipsawed from reversals. A trend is your friend until it’s not working anymore. There has to be a better way.
As a day trader in the stock market, you have experienced at least one of these events in your career so you can look back and smile and say yes I have, I paid my dues. Many traders go bust more than once before giving up. Don’t let you be the next one. Failure to trade the plan is a common problem. When you have gotten to the point that you can trade a plan, you have arrived. Celebrate, you deserve it. Do you have a plan for the online day trader? You must love to trade stocks. Live, laugh and love and make each day count. When I say count, I mean it as you will see inside the system.