ten ways to screw up (tm) (c)

A

andrasnm

I or friends I have done this one way or another.
The list has a certain order which I considered important
last being the worst.

1) trade under funded and under pressure (financial need for
money)
2) trade bigger because of ego.(size kills and girls like size elsewhere :D

3) afraid to go short.

4) trade for no reason just to pass time or gamble.

5) buy dips and sell rallies contra trend, sooner or later the market will squash you like a bug. Always buy on dips when the market goes up, sell bear market rallies (short), think longer 2-14 days or more) some do the reverse now, buying on dips.....

6) trade without a risk reward ratio. 1:3 is I think a minimum.
7) trade when risk reward can't be quantified or uncertain to
get out at the pre-set limit loss. Bad fills, scalping can all
qualify

8) trade without a plan (set #6, follow clear hunches, read the tape watch simple indicators $VIX and follow it as gospel)

9) freeze on a small loser and make it a disaster.
10) trade when you know you can't make any money

Follow these every single one and I am sure you will make $$$$
and send me my royalty check.:D :D:D
 
Originally posted by andrasnm

5) buy dips and sell rallies contra trend, sooner or later the market will squash you like a bug. Always buy on dips when the market goes up, sell bear market rallies (short), think longer 2-14 days or more) some do the reverse now, buying on dips.....
6) trade without a risk reward ratio. 1:3 is I think a minimum.
7) trade when risk reward can't be quantified or uncertain to get out at the pre-set limit loss. Bad fills, scalping can all qualify
More...

I think 1) and 8) are the most important. I don't personally agree with 5), 6) and 7).

I don't agree with 5) ... entry technique is not too important in my opinion (I am in agreement with the market wizard Van Tharp, who places much less emphasis on entry technique than on trade management) ... it isn't necessary to always buy on dips when the market goes up, for the simple reason that there may be no dip.

For me, trading is an imprecise art. Therefore, I do not wish to be shackled with rules in 6) and 7) and I prefer to use my own experience and personal discretion rather than use 6) and 7) rigidly.

I will simply buy or short when I 'perceive' a profit opportunity. If I am wrong, I will take a stop quantified in terms of dollars (this is the crucial part of all my trading); if I am correct, I will run profits until I 'perceive' there is little juice left. I don't use strict risk:reward rules, although I recognise the need to average a higher gain than I risk (Van Tharp's discussion of R-multiples goes into this in great depth in his published works). In a nutshell, I simply allow the movement of the stock to dictate what I should do ... it requires no ego and minimal prediction.


 
candletrader: “I don't use strict risk:reward rules. I simply allow the movement of the stock to dictate what I should do... it requires minimal prediction”

I practice a somewhat similar strategy, as I have found targets to be the most irresolute and illusive aspect of trading. I do, however, define and weigh a probable outcome against the risk.

Evaluating risk is the part of the statement I am primarily concerned with. It’s relationship to forecasted reward is more flexible, IMHO.
 
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