The Top Ten Scariest Things A Trader Can Do…..

On this scary holiday of ghouls and goblins, trick or treating, and haunted houses it made me think of what is really scary for traders to do. Emotions sometimes are sending traders messages, fear can mean that you have not done enough homework or that you are trading too big. Fear can be screaming at you to cut your losses as they become bigger and bigger.

The majority of the time you should be greedy when you are winning and let your winner run to a logical resistance point but be fearful and ready to exit when you are losing afraid that you loser will grow bigger.

The Top Ten Scariest Things A Trader Can Do…..

  1. When risking 5% of you account on any one trade, 10 losers in a row and BAM! 50% draw down and you need a 100% return to get back to even. If you don’t think that you will have ten losses in a row this year then that is SPOOKY!

  2. Buying far out of the money options with a .10 delta. Generally this trade will lose 9 out of 10  times, only being profitable from the strongest trend within your time frame. Spooky that traders want to buy lottery tickets with those odds.

  3. Taking a trade with NO EXIT STRATEGY that is a horror movie. It is dangerous to not have a stop loss when you enter a trade becasue if a trader thinks they bought in at a great price the price starts looking better the lower it goes, and terror of all terrors the trader adds more to the trade! It only takes one mistake letting one trade run into a huge loss and add to it to blow up an account.

  4. Shorting the strongest stocks in the market during a bull market is scary as they continue to go up.

  5. Going long a stock in a death spiral due to a business misstep or earnings decline is like riding a roller coast that generally ends up much lower when the trade is finally closed.

  6. “Going all in” on one trade, with this plan all it takes is one bad trade to blow up your account, those are scary odds.

  7. When you are losing you go from your trading plan to “plan B” “hoping” maybe even praying for a reversal. When a trade turns you religious and leads you to pray it is definitely time to get out!

  8. Asking for others opinions instead of following your trading plan or methodology is very scary, time for homework not tips.

  9. It is terrifying to watch someone fight a trend instead of follow it. The bigger they go against the trend the scarier it gets. They are trying to stand in front of an elephant walking and tell it where it should be going.

  10. When you find out you are in a trade that is 100% the opposite position of the best traders you know, it should be a wake up call to reassess your thinking process, I know that is always an uh oh moment for me, I usually lose in those situations.

Happy Halloween Everyone! Be Safe My Friends!