A huge number of traders constantly gets into the same trap. It turns out to avoid them is not too difficult if you use simple rules, which offers us the author of this article, he is constantly sticking them in any trade: from дэйтрейдинга to positional.
Each loser and almost any beginner to trade the market does almost the same mistakes. The first category is exposed to them, because otherwise simply can't behave. The second - as a result of his inexperience. But in any case, the basis here is one - all think stereotyped, in strict accordance with the psychological manifestations of the inherent behavior of the crowd. If we reject any illusions about his own "I", we are all imperfect people, and simply stupid when it comes to making the right decisions on financial markets. But overall, how would we were wrong, we, as a crowd, tend to be wise, therefore, the only person who is not wrong - it is the market itself. We will not go into the reasons for this, broadly speaking about the effectiveness of the market and his perspicacity, and will proceed to the main errors of investors and traders, most clearly manifested and which to avoid, to ensure that the sharp growth of the profitability of the trade.
Error № 1. Buying on top
A huge number of traders in the market at the moment when it is already time to go, regardless of the extent to which they trade. In terms of the wave theory of Eliot this usually occurs at the moment of ending of wave 3 or 5th. Although in each case there still remains a chance to take profits from further growth of the market, but the likelihood of a decline in these aspects are already very high. As a result, a small trader receives pleasure from the yield of the transaction, but very soon it sees as a decline in prices leads to a loss.
If this happens at the end of the 3rd ascending wave, then the trader is doomed to suffering, because the price begins to move according to the laws of the 4th wave, where intricate movement in the side or slightly downward price corridor throw it in the heat, cold: the position is constantly changing, moving in profit, in loss. When bored, the trader goes with a loss or with a small gain, after which amazed, as the price goes to new heights, and his deal would give good yield.
If the trade position is created in the end of 5-th ascending wave, then things are even more bad: price trend may change at any time in the foreseeable future will not return to the point of entry. Perhaps, this option is the worst of all existing, while sobering comes quickly, but the price of the lesson is often very high. However, on this very scenario of developments with all the losers and a huge number of traders beginners
Why? There are several explanations.
the First is a sustainable opinion that the movement of the market should be accompanied by displacement. Some truth in this. Indeed, if the price increase is not supported by displacement, it means reluctance on the part of new traders to enter the market, so that trade occurs chiefly between its current participants and a number of newly arriving and departing players. Sensibly arguing, you can quickly understand that the growth of the volume - a double edged sword: because if someone buys, someone must and sell. And there is a Mature idea: whether the growth of the volume of the growing market be a sign of reaching the top? Because the volume is a leading indicator for estimation of future price movements. But one thing is when the volume is growing at break of the market serious resistance level, and quite another - when the prices in the upper part of the graph where nothing disturbs prices move in any direction. In the first case the volume of the actually each buyer, and the second - it is probably the enemy.
the Second explanation lies in the presence of the propensity of people to forget all the sensible reasoning, when they see the active growth of prices. It seems to them that they did not have time and will be at the tail of luck, already улыбнувшейся many who bought shares. Such traders rush into the market, and natural soon receive damages. Exactly this category of investors often provide the growing volume that we are constantly aware of peak prices.
Actually, these two explanations to a certain extent are equivalent. But how can that be? Let's discuss it a little. That is the volume? This is an indicator that shows us the number of traded shares or futures for a separate period. But one thing, if the price is changed by 0.5%, and quite another when she moved to 5%. Apparently, net changes in not so good indicator as it may seem in the beginning. The only way out of this situation is to use graphics, excluding from consideration the volume and accent your attention on price developments, the adjusted volume. A good example of this approach graphics Эквиобъема, the Метасток.
So how do you avoid this common mistake of buying on top?
the Answer is contained in a few simple rules:
Never buy at the growing volume, if prices are at the top of the market and there are no good reasons for further growth of prices.
Buy on growing market, supported by a volume only if you see a break through the resistance level.
Always remember that against your purchase is worth a sale where the trader out of the length of the transaction or enters into a short position.
Error № 2. Sales in the base
The trap of "sale in the Foundation are fewer traders, if compared with the situation "buying on top." Strangely enough, but this case is like a mirror with the parsed above: the same increased volume in conjunction with highly falling prices. Again, if we give in to the temptation to rely on in his analysis of the dogma about the extent supports the trend, or be susceptible to impulse greed, seeing how others make a market fall, then surely lose.
of Course, the increased volume can be interpreted as the inflow of insightful and knowledgeable traders, who are confident in further lowering of the market. Maybe so, but it is unlikely you will be able to survive in a short position is a correctional верхненаправленное market movement can be very intense, not leaving with a loss, and then watching the new price drop. Also don't forget, many of these traders to hedge their positions in options or межрыночными spreads, and can withstand tangible market movements in both directions without any fear get losses.
as for the main trading public (ordinary investors, traders and a number of managers of investment funds), not обременяющей knowledge about the tools available on the market, it is susceptible to emotions, and nourishes a panic market. As a rule, he has peaked depression, type the letter "V", supported by displacement. Selling in such a situation, taking short positions on the trend, very soon be confronted with the spread of prices, and with trembling hands speculation or closed with a loss. Those who sell, getting rid of long positions, almost immediately will regret watching the rapid restoration of the market.
How to avoid such mistakes? On this score there are rules similar to the foregoing:
Never sell at the growing volume, if the rates are at the bottom of the market, especially when all levels of support passed, and there is no strong reason for further fall in prices.
Sell on a decreasing market, supported by a volume only if you see a breakout of the level of support. 3. Always remember that against your sale worth buying, where the trader goes from a short trade or opens a long position.
Error № 3. Sales growth leaders
Very often a trader takes a short position if he sees that the object of his attention, stock, futures, showed rapid growth of the prices, and then did a reverse rollback. A huge number of players on the market assumption: it is a signal of a coming attack bears. To their great disappointment, after a period of lull and movement in the price range, the price soon with great ease rush above, bringing disappointment short traders.
Yes, trading on correction - a good strategy, often bringing good profits for traders carefully defined the possible behavior of the market. But it must never be forgotten, are trading against the existing trend. Hence the conclusion: the stance per downward correction - long-term employment only for option a good price return and provided lessons trade from accurate resistance level, which has shown its stability.
In reality, the leaders of growth, concentrating your price move, do it with the sole purpose of "settle"to go higher. Their correction could occur not as a result of price movement downwards, and "work out" by a lateral trend. On the chart, it looks like clot price bars located in a relatively small range, which emerged after the impulsive and rapid price movement. Yes, the spreads growth leaders also occur, but to stop their progress is not easy, so you must use the following rules:
don't take short positions of the leaders of growth, hoping for a strong correction - most likely it will be not so significant.
Trade with the use of strategies, designed for a breakthrough.
the longer side trend after a heavy price surge, the more chances for the market to go higher up, breaking the resistance of the upper edge of рэнжа.
Error № 4. Buying leaders growth
Buy recent growth leaders - the same mistake as selling them. It seems absurd, but in reality they really are. Why? The answer is in the deciphering of the behavior of the leaders of growth, most often observed on the market. Common sense tells us that prices cannot rise forever, but there is almost no limit to it, so the only thing they need first of continuation of the upward movement is "settle". But the problem is that this period can be quite long, stretched out on the week, so that the effect from taking a long position is not very big, even if the purchase was successful and trade all the time in the the profit zone.
the Rule for avoiding the error № 4 simple as ever:
Never hurry up to take a position on the leader of growth in the direction of the trend, if you see a slowing down, and roll.
Use a stop order, calculated on the execution after breaking through the resistance levels.
Buy with a limit order not earlier than on the third strike of support formed by the current moment, simultaneously being consistent проторгованному рэнжу and the previous impulse growth.
Error № 5. Purchase the leaders of the fall
Buying leader of falling mirrored in nature sales growth leaders. What can you expect from stocks or futures, which is in a downtrend? Nothing but a minor correction. Often it simply turns into a side trend, after which prices continue to move down. Again, to be successful in trading on the correction, should buy the good support, and accurately guess what here a Foundation, let and local.
So the rules are:
don't take long positions in leaders of falling, hoping for a strong correction - it is unlikely to be significant.
Trade with the use of strategies, designed for a breakthrough.
the longer side trend after a heavy price drop, the more chances for the market to go below breaching the support of the lower edge of the рэнжа.
Error № 6. Sale of the leaders of the fall
Again, this error mirrored message № 4. The leaders of the fall is not so easy to stop: the market is definitely has inertia, and even if he reached his objective bottom, residual driving force of the downward trend able to finally convince the prices below. Infidelity solution here is simple inefficiency of use of capital. Side range can last long, for days and weeks, and then go in the direction of the previous downward trend. The most critical point - the third strike on the base.
So for a given situation, the rules are:
Never hurry up to take a position on the leader of the fall in the direction of the trend, if you see movement slow and recovery in prices.
Use a stop order, calculated on the lesson short position after the breakout of the level of support.
Sell with a limit order not earlier than on the third strike of resistance developed to date are consistent traded рэнжу and previous pulse fall.
Error № 7. Buying past leaders of growth, recently fallen
This error is a result of greed trader. Not a secret, he often comes to the market, having heard about the super-profits, received from the phenomenal growth of the Internet companies. Having got acquainted with graphical analysis, a trader spellbound looking for such shares, as YHOO, AMZN, AMCC, JNPR, WCOM, LU, QCOM. Mentally, he sees that he would have if bought these securities in 98, 99 or even in 2000. Therefore, no wonder that he чудятся the same movements to the transcendental heights, where will be taken of the profit. These feelings support the sustainable myth that "rates always come back". But it is unlikely now, this rule applies with full force.
currently, we are dealing with a different markets: the world has changed, it swept high technologies, appreciate that often simply impossible. Therefore, the guidelines loyal to General Electric (GE) may not be true for Yahoo. Definitely, more "civilized" market in this respect is a market commodity, and there we have a lot more likely that the price of goods is strongly not fall below its long-standing historical lows. At shares market should always remember: if the price for some reasons have fallen dramatically after strong growth, then this were strong reasons. And they may have such consequences that will lead our investment in the purchase of shares to the full depreciation, namely to zero. If you think that it's rare, you are wrong. Any business has its beginning and end, and in our age of ultrafast all significantly accelerates, it is foolish to expect a speedy restoration of the positions of the companies have lost its position.
putting aside the fundamental opinion, we can formulate the basic position for shares, strongly fallen in price after the phenomenal upsurge: the price should move and show your "aliveness"and not be in стагнирующем condition. In the case of "aliveness" behavior we can still hope for good movement up, but with obvious stagnation not likely to happen - there is no sufficient momentum is so vital to us the power of motion. Of course, the action can grow by 30 percent and 50 percent in the brief intervals of time, but the danger of losing positions is extremely high. But in General, these paper likely to go through a long period of being in the stage of depression, capable last for months or even years before it starts to move up, if it ever happen.
this rule to avoid error № 7, are:
Never hurry up to buy shares, previously were in favour, and now strongly fallen to the prices, from where they began to grow.
At purchase of such shares just take them only as a short-term trading.
Buy with a limit order after overcoming the nearest resistance and fastening of the price above it, but when you roll back to him.
And of course, it is always necessary to stop the order closing the transaction in case of failure, if not to use other tools, providing regulation of risk. From myself I shall notice: we must actively use them, fortunately, on the market there are plenty of such mechanisms, among which, in my opinion, the most useful options. Fortunately, almost all securities under-the-gun active traders, they are in prosperity and well расторгованы.
Error № 8. Greed
Trader focuses more on the amount of their Deposit, than on the schedule of the exchange rate. This is his main error size of the current profit or loss account not say anything about the further possibility of its change.
Your greed is that you commit profit as soon as it was over Your costs of doing positions, despite the fact that the market is going up, and the damages to the lock can not hope for reversal of the course in the future. Thus, You as a rabbit sitting in front of a boa, see how melts Your Deposit, unable to close loss-making position.
don't be greedy, don't be a "pigeons", consider in the first place market, and the money the second.
Error № 9. Unsystematic
90% of all Traders can not clearly explain why they do this or any other transaction or why in one case take into account those factors, which are then excluded from decision-making, which means they have no game system. In some cases You see on the news, in other targeting of the technical indicators, and it depends more on Your attitude and opinion of others than from the analysis of past mistakes.
the Absence of a set of rules and factors, on the basis of which the decision, leads to the fact that in the future it is impossible to analyze errors and evaluate the effectiveness of Your work.
Error № 9. Exposure to emotional decisions
Working on financial markets, earn not many, but all lose, lose their nerves. This loss leads to the fact that instead of informed decision - "wait for Tuesday to be revealed after the data Monday" - you, watching the Bouncing course, do a deal on Friday and lose not only interest, but a reversal of the trend. In addition, Your emotions change the initial calculation, for example, one common emotional mistakes is a modification of the original level of stop-loss in the hope that "the market turns just below 10 points of my foot, so you need to move or even cancel". Remember - SET STOP-LOSS you can't UNDO!
Error № 10. The desire to get the result immediately
If You expect to earn on the 6-th model Audi for the first month of work, because the first 2 deals were profitable, I am so sorry. It is better to take it as an axiom for the first 3 to 6 months of real work defeat the old Cossacks - a very good result. The first positive results of randomness, which, however, happens to 90% of investors. Next are the losses, and Your future depends on You to them or not. If you are, then consider that pay for their invaluable experience which will bring You through a year of stable earnings, if not, Your mistakes will be wasted. In Forex, you can accidentally earn very much, you might accidentally make a lot a few times but earn much constantly, relying only on chance or luck impossible. For this we need the experience and theoretical knowledge. Sooner than in six months to a year You will have neither. Well, if You win, you urgently invest in Forex in 100 times more, because You are a fascinating trip, and so far, luck has not left You take from it everything that is possible!!!
Error NR 11. Simplify
On the website of a well-known Russian-Swiss financial company Sovereign Finance Group is a rule table reaction of the exchange rate on economic data type "if the rates increased, the rate is going up". Such rules there are about 30. Now if You will not follow, then a lot to lose, and if you then lose even more. The point is that these rules are SIMPLIFIED REPRESENTATIONS of situations in pure form in the economy does not happen, and are always in pairs, the conclusions of these rules in 90% of cases, contradictory. You should not blindly follow the same rule, but to build their chains and CHOOSE PRIORITY RULES FOR a SPECIFIC CURRENT SITUATION. For example, increased rates. IN THE UNITED STATES. The idea of the dollar must rise. But! If most of the foreign investments in U.S. stocks, and the economic situation is such that the growth rates can cause problems on the stock market, it is likely that the dollar will fall. This usually occurs at the end of the period of economic growth. Now, if rates rose at the beginning of the economic cycle, when the stock market has gained strength, the growth of the dollar would be undeniable. In fact, Your "simple rule" expands to "if an event happened And, while B is more than ever The same, and With the expected decline, most likely.... we need to think." Although even in this form it is not so difficult.
Error № 12. Negligence and hope technique
"I put the limit, and the broker server accepts the request to install limit transaction No. xxxx client No. xxxx " two big differences. Between these two phrases lies cable weight and client software, server, Internet, which has a bad property off precisely at the moment of sending an important query. The result is You lose money, and claims to the broker groundless, because NO APPLICATIONS had NOT COME! It is always recommended after the implementation of the actions in the trading system to wait for confirmation of its execution, and remember telephone broker better than the birthday of his wife, in case of a break in communication and derivatives transactions. Better make it a gift to OTHERS through the week, do nothing at all.