In my previous blog post, I covered three bad trading habits to break pronto. They included averaging down an investment, going “all in,” and buying and holding. In this follow up, we’ll look at three more bad trading habits that can also hold you back from reaching your potential as a trader.
As I mentioned, many of us are unaware of these habits. First they become a comfortable part of our routine, and then they become ingrained in our routine. Developing bad trading habits are dangerous, as they will make us vulnerable to mistakes.
Because we like to avoid mistakes when trading, I asked chat room members to chime in on three more bad trading habits that can hinder your performance. They are:
4: Holding positions too long
We all want to make the maximum amount possible on a trade. “Buy low, sell high” has been hammered into our minds, but unfortunately that happens far less than we’d like. Additionally, if you’re in that mindset, it means you’re telling the market what you want it to do. Bad move.
Holding positions far too long happens all the time, whether it’s a gain or a loss. Instead, look at a stock or option in context. How far has that trade come? Take some or all of it off the table, and don’t follow the crowd. Know your own risk threshold and make decisions accordingly.
5: Being greedy
As option traders, we are often tempted to keep going. You have a nice gain on a trade and are ready to take profits, but then you decide to stay on the train. You roll up higher or to a longer strike – and then that trade goes in the hole. Take profits when you can, then take a break and wait for a new entry point. Charts are extremely helpful here – they’ll tell you what to do.
6: Making “boredom trades”
Do you feel like you have to trade all the time? Do you get bored and fire off a trade “just because”? Stop.
I have seen more people get chopped up in this markets than I care to admit, and often it is because they were bored and needed to trade. It is incredibly important to be patient as a trader. Wait for the right setup and execute on that trade to the best of your ability.
If you’re bored, go outside and take a walk. Run errands. Hit the gym. Meet a friend for coffee. You’ll come back refreshed and focused.
There are many other bad trading habits out there; these are the ones I happen to see most often. Identify the ones that affect your performance, figure out what it takes to change and do it!
Copyright: andreypopov / 123RF Stock Photo
