Stock Market Education 4

Three of the biggest mistakes we see traders make, you are probably guilty too!

We hope that you are learning and earning from your free trial to Alphatrends. Below is a short discussion of some of the biggest mistakes we have observed traders make. Avoiding these mistakes can make the difference between your success or failure as a trader. Don’t make a difficult job (trading) more difficult than it needs to be by committing these errors.

1- Fighting the trend

Newton’s First Law of Motion states

An object at rest will remain at rest unless acted on by an unbalanced force. An object in motion continues in motion with the same speed and in the same direction unless acted upon by an unbalanced force.

A trend once established is more likely to continue than it is to reverse. That is one of the tenets upon which technical analysis is based. The definition of an uptrend is “higher highs and higher lows” by its very definition, a stock in an uptrend has more opportunity for profits going long than trying to short the pullbacks. The sum of the rallies will always be greater than the sum of the declines in an uptrend. At Alphatrends, we focus on trend trading.

2- Chasing after a big short term move

It is said that confidence moves in direct proportion to the price action. In order to profit from trading we want to anticipate when stocks will move and then participate once the actual momentum starts. It can be lonely to be amongst the first buyers of the short term higher high when trends become aligned, but if you truly understand price structure and have a stop in place then your loneliness and doubts will be replaced with confidence. No one knows whether a stock trade will be a winner which is why we use money management principles for position sizing and risk management to have a plan to cut losses if the market doesn’t agree with our position. Understand how stocks trade by continuing your Alphatrends subscription and learn to keep your emotions in check so you are not buying towards the end of a move.

This article outlines a strategy for getting involved in stocks which gap

3- Holding onto (or worse, adding to) losers

Price is truth. Stocks are priced based on all information known to all participants. Not all participants have access to the same information and while that may seem unfair, if we objectively observe price action we will be able to balance our opinion with factual
price action. We may have a belief about what a stock should be worth but, the truth is, the market does not care about our opinion. Your Alphatrends subscription will teach you the proper placement of stops for your timeframe.

Everyday after the market closes we ask ourselves these questions

  1. Did we help people make money?
  2. Did we help people avoid losing money?
  3. Did we present information in an educational way?
  4. Did we provide a positive environment for the Alphatrends community?

We are dedicated to helping you become successful, are we doing that job well?