A Few Wise Words I Wish I Followed From The Get-Go As A Trader
The excitment and the rush you get from trading and watching money flow in and out of your account can be absolutely blinding. Amateur traders read the endless stories about other traders who started with nothing and made millions. They are instantly hooked!
Veteran traders know better! They understand the game and control their emotions. They take risk but with discipline and emotional control. They also spend a lot of time writing about it in the hope that novice beginners do not fall into the same traps they did.
I would have saved myself a rollercoaster ride from 0–100 and back to humble beginnings, many times over, had I listened to the following
Always scale into trade, both in and out
You can’t time the market perfectly and foresee everything before it happens. So seasoned traders know to scale in even if they are sure there trade is 100% a winning trade. Scaling also applys on the way out, you will never be able to call the top, so take your profits as the emotional volatility increases.
A trade is like a truffle cake, go in layer by layer
Manage & Take calculated Risk
Surprisingly, by far the most important part of trading is actually managing risk. Only when you control your risk and losses will you really break to become a full-time profitable trader.
Someone once said:
Its not about how much money you make, its about how little you lose!
Never put all your eggs in one basket
Also known as gambling! Putting everything in one trade, expecting to win big is the single biggest mistake traders make. I have done this before when I was really down and guess what? It destroyed my account.
Part of managing risk, minimizing loss while maximizing the potential for gains is to diversify your trade positions.
Create a spider web and cast it as wide as possible
It’s Ok To Stay Out
As traders we are programmed to trade — DUH! But it happens so that sometimes, its better to just stay out of any positions and let trade setups come to you when the time is right.
This is a hard lesson to learn because you always feel that ideal money is dead money. But really ideal money is better than gone money.
Don’t force a trade!
Don’t let your emotions get the best of you
Novice traders want to feel the high of taking a trade and playing with their money. While Veteran traders train themselves to do the complete opposite.
If Your Heart Is Pounding, You Are Doing It Wrong
You will lose some trades
That’s just inevitable, and you will never hear real traders claim to be 100% right. Regardless if you are an investor or a trader, long or short term, you will have losing trades. Its really about owning up to it and moving past it.
Learn from your mistakes
A traders, we always want to be right. Unfortunately thats beyond impossible, or at least the chance of someone being right 100% of the time are almost neglectable. So expect to be wrong and take losses.
The definition of insanity is doing the same thing over and over again and expecting different results
Don’t Believe the Hype
The whole stock market is filled with hype, its not just penny stocks and low-life stock promoters. You see big money reeling retail investors all the time, by creating demand and selling against it, driving the stock higher and higher.
In penny stocks, this phenomenon is wide-spread and frankly mostly completely unregulated. Small companies (legimate or not) use stock promoters to attract retail investors to their stock. Unfortunately most of these promoters end up creating huge runs and dumping the stock after reeling the thousands of small fish.
The smaller the stock, the bigger the hype
Don’t Chase A Run
Chasing a run is probably one of the easiest mistakes to make and one that many inexperienced investors make. They see a stock that has been going up and up and decide to finally enter because they will miss even more. As if they picked the worst timing unintentionally the stock starts to fall.
They blame themselves and call it bad luck but in reality it plays out the same every time and they are not the only ones to fall for it.
The steeper the run, the harder the fall!
Don’t Get Caught In A Pump’N Dump
I was lucky enough to never have been dumped on, unfortunate many become victims of Pump’N Dumps. Though I was once caught with my pants down after a entering a trade months after it was dumped, expecting the Rinse’N Repeat. That didn’t happen and I was left with an insolvent bankrupt stock worth $0.00001.
I wrote a story about my first trade which happened to be a Pump’N Dumps — Mind you I was not the one pumping or dumping, just a luck amateur who dodged a bullet on his first trade.
Happy Trading!
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About me
I like to describe myself as a technologically savvy person who’s able to leverage experience and a broad background to excel in a variety of roles. Although I have an engineering degree, I have been drawn to various other areas through sheer curiosity, and have developed a strong passion in them. I have dabbled around in the stock market, and currently work on making awesome apps. And I enjoy amongst many things technology especially the FinTech space, traveling, fitness and music.
