A Word of Advice: Don't Think, React 

Mistakes in Trading .Com

A Word of Advice: Don't Think, React

Here is another example of how futures trading is quite different from everything else in life. In every other endeavor we are taught to think first, then react. In futures trading—with a caveat to follow—you are often far better off reacting first and then thinking later. The caveat is this: this is only true if you have developed and are executing a well thought out trading plan. If you decide that you will exit a particular trade if a certain set of criteria is met, then that is exactly what you need to do. The specific chain of events that caused your exit criteria to be met are completely irrelevant. While they can be analyzed after the fact for information that may help in the future, they cannot be allowed to convince you to do one thing when you know you should be doing something else.

At the most base level consider a floor trader who typically scalps the market trying to make two or three ticks per trade. He is long 30 T-Bond contracts when a huge wave of sell orders hits the trading floor. He has two potential courses of action:

  1. Stand around and try to figure out "why" a wave of selling is occurring
  2. Start hitting bids instantly to exit his long positions

If he is a good floor trader and if he wants to survive, he will choose b. In other words, he needs to react immediately. Every second he spends analyzing the situation costs him money.

If a situation arises for which you have already determined exactly what you should do in case of just such an event, react and do it. Don't think (whoever thought you'd hear that kind of advice?). If a situation arises for which you have not prepared, and you have no idea how to react, then think in terms of risk control. Ask yourself, "what are my choices and which one is the least likely to result in a huge loss?" Then do that.

Categories in Trading Mistakes

Lack of Trading Plan
Planning plays a key role in the success or failure of any endeavor

Using too much Leverage
Determining the proper capital requirements for trading is a difficult task

Failure to control Risk
Refusing to employ effective risk control measures can ensure your long-term failure

Lack of Discipline
A lack of discipline can destroy even the most talented and best prepared trader

Useful Advices to Beginning Trader
You can control your success or failure

All about Stocks
Encyclopedia about Stocks. That you should know about Stocks before starting

Forex Glossary
All terms about Forex market

MistakesinTrading.com, 2008-2015
MistakesinTrading.com - don't make mistakes in trading, be a good trader!