Hey! Hope you are well, here are two simple changes I made a couple of years ago that really helped me to become a more confident trader.
Banning myself from dollar cost averaging down:
When I first began to trade, I made one of the most common and costly mistakes a beginner trader can make which is dollar cost averaging a trade that is sitting on a loss. When you are sitting on a trade that’s currently on a -$250 loss (for example) it’s tempting to double down and think that lowering your entry price will make it easier to get out of a lousy performer. But in those situations, it’s more than likely that you are fighting a sideways or downwards trend. It’s easy for us to let our ego’s get in the way and think that the market is irrational and refuse to admit that we may have made and error. But the market can be irrational and “wrong” for a lot longer than we can remain solvent. I can’t tell anyone what to do with their trading positions or finances but what I can say is that banning myself from dollar cost averaging down and respecting my stop loss (or even getting out sooner if I see a trade go against me) is one of the best trading vows I made for myself. Yes, sometimes I got out of a trade and I see it recover and go back up but the majority of the time it has felt like jumping out of a plane in a downwards spiral and later seeing it crash into a mountain. As a side note, I’m talking about trading assets for profit not assets that you may hold because it has personal long-term value such as dividend paying stocks, gold, silver, or bitcoin. Which may be assets you are happy to sit on and buy at lower prices because you may see potential long-term value in holding them for retirement (as an example).
Trading on timeframes that are weekly or longer:
I didn’t start to see any consistent profit until I decided to show more patience with the charts and trade on longer term timeframes. There are a few benefits I found to trading longer term timeframes (weekly or more). 1. You can do all of your analysis on the weekend and calmly make a decision with no tight time constraints. 2. In my experience buying into trends with longer-term confirmation or breakouts/continuations are more reliable than charts with only 1-2d confirmations, which are likely to be trading within the constraints of a bigger longer-term trend. Patience is one of the best skills a trader can have in my opinion. The hard part is not getting tempted to enter a shorter-term position that may look really promising, but one thing I always remind myself is good things come to those who wait, and that is defiantly what I have experienced in trading. One strategy I have used for tempting shorter-term positions is to trade the smaller time frames on smaller position sizes and wait for the longer-term confirmation. Patience, and calmness always trumps dopamine and FOMO.
Those are two little adjustments I decided to make a few years ago which have worked out quite well for me. You may have noticed that the hardest part of committing to the principles I’ve listed above are letting go of the fear of loss, letting go of your ego and having the courage to show patience in the market. There is nothing hard about the 2 strategies I have listed on this post, they are dead simple things to do, the hard part is not letting the common unhelpful emotions we experience get in the way of sticking to simple rules which are often effective and are definitely beneficial for your trading psyche.
Until next time.
Disclaimer: The analysis and commentary found on this website is for educational and entertainment purposes only and does not constitute financial advice. Always Do Your Own Research and assess risk independently before making any trading or investment decision.