Everybody talks about the best moment to enter a trade.
Which made me realize…
…not a lot of people talk about when NOT to enter a trade.
There are 4 core reasons why beginners enter trades that are bound to be losers.
And more importantly, they’re all tied to one single factor.
- FOMO (fear of missing out):
FOMO trades happen when you are afraid of missing the move.
You may feel like you are faced with an opportunity that will not present itself again, and, of course, you don’t want to miss out.
Usually these opportunities are highly volatile…
Which forces you to make a quick decision — often, a wrong decision.
If you’re asking yourself: do I enter or leave it alone?
Entering a trade just because you’re afraid of missing out is not a great idea, so let it go.
If you hear about a certain stock or trading opportunity during a family dinner or while having a chat with a friend…
…that stock is hyped!
You’ll know when there’s hype around a stock the moment someone who doesn’t trade for a living starts spouting emotionally fueled statements such as:
“You can become rich by just buying this one stock!!”
Not only that, most times people are just repeating something they heard from someone else or from the news, which means it’s too late to get in (even if there’s actually solid reasons behind the move).
You’ve heard wonders about this one stock that’s going to be a “revolutionary technology” in 5 years, so if you buy now, you’ll be rich by then.
These are harder to fight.
You’ve seen how companies like Amazon, Apple, and many others have gone from a few dollars to hundreds.
And there will be others that do the same.
But trying to catch the one that does, at the exact right time… is unlikely to say the least.
Plus, have in mind that in order to cash out big you’ll need to invest a lot of money and wait a lot of years, and it may not even happen!
Quite some risk if you ask me…
Possibly the one that we traders have to tango with more often than the others…
And in my opinion, the hardest one to tame.
When you lose money on a trade it always feels awful.
It’s easy to get riled up and try to win your money back as quickly as possible as a way to take revenge on the market.
But this makes you no different from a gambler at a casino.
There will be plenty more opportunities ahead, so take your lesson and look on to the next one.
So… do you know the one thing all these have in common?
They all stem from emotion…
And trading emotionally always leads to disaster!
That’s why effective trading is based on logic.
When you just react to a trade without any plan or process in mind, your trade will be overtaken by emotions.
Now there are 6 distinct components a solid trading game plan requires.
Here they are:
If you are missing any of these components on any or all of your trades, it’s going to be tough to succeed in the long run.
I personally teach how to master each of these components and how to trade based on logic inside Hawkeye Traders.
If that’s something you’re interested in…