Not following a clear and simple trading methodology. Methodology includes: your analytical tools and how to use them.
Only by trading systematically you will know when to buy or sell without using your instinct ,
how to trail the position and when to exit. Instinct does not work over the long run.
Lack of Discipline. You should consistently follow your proven system . The trader should define
the best methodology that works ,write it down and follow it systematically.
Lack of Patience. Market only trends 20% of the time, meaning that 80% of the time the markets are not trending in one clear direction. Hence, there are only few good setups in a given week to take.
However, if you miss a trade remind yourself that there is always another trade tomorrow or next week.
Lack of Money Management.you should limit your position risk to 1%-3% of your portfolio (we have 1%risk) .You also need sufficient capital to make sure you will not be stopped out prematurely .To determine the level of the stop loss use either fixed stop or ATR (volatility) stop loss. Fixed stop loss is usually used under previous low-high or resistance -support .
Do not put on one trade big percent of your portfolio (we have 15%)
Money management also includes risk/reward analysis. Don't trade less than 1:2 ratio,meaning your the distance between you stop, entry and target should be not less than 1:2. When trading, we all the time should apply probability of success and failure and protective stops. Trader with small account should reduce risk by trading small, having fewer shares of stocks, so the risk on any given position will be relatively small .
Unrealistic Expectations. It is difficult to have above average returns trading your own account.
The trader (esp the beginner trader) should concentrate on not losing his own money.(Jeffrey Kennedy)
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