Some of the best traders in the world are risk-averse. They hunt down opportunities that have huge upside potential while taking the tiniest risk.
And you know what?
It's the complete opposite of how beginners trade. In fact, it's not uncommon for new traders to blow up their account. Many of them lack the knowledge or experience to compete. They're not versed enough on position sizing, putting together a trading plan, and developing the discipline to follow through on it.
In this issue of All-Access, you'll learn about the most common pitfalls beginner traders make and how you can avoid them.
Today, you'll hear from:
Jason Bondwhere he'll discuss the importance of having patience when you are trading and how it can lead to greater profits
Davis Martin explains how a trading journal can help you prevent costly trading mistakes
Petra Hess reveals why "the trend is your friend" and how you can capitalize on momentum stocks
Kyle Dennis knows the news before it's news.
Just recently, Kyle spotted some unusual options activity in e-commerce stock, Pinduoduo (PDD). This prompted him to jump into calls on the trade quickly. And, what do you know — the stock popped 80% overnight! Shortly thereafter, the trade was being talked up heavy on CNBC.
Sometimes you learn more from your failures in life than you do your successes — and that applies no less to trading.
Even Jeff Bishop and Jeff Williams — two of the most successful traders here at Raging Bull — blew up accounts during their early days before they learned how to grow and maintain successful ones.
If it weren't for those mistakes, however, they probably wouldn't be the traders they are today.
While you'll undoubtedly make your own mistakes while trading, you can join the headstart camp by learning from some of the classic boo-boos that veteran traders have long since overcome.
Let's look at a handful of them:
Not doing your "homework." Remember what would have happened if you didn't do your homework in school? You may have been able to scoot by without the teacher checking your assignments for a while — but when the time came to take a test, you would have felt totally unprepared. Same for trading. If you don't study the charts or watch the news, you won't have the appropriate context to base your decisions on.
Risking too much on one trade. When you're in a rush, you're more likely to trade positions that are too large. As a general rule, you could decide to risk no more than 2% on any given trade. If you risk $5K on a trade and you only have $10K in your account, you can't expect your trading life to last a whole lot longer. If you start off with $200 positions, you'll have more room to experiment, diversify your strategy, and learn as you go along.
Trading too often. If you put your money in too many positions rather than waiting for the best setups, you'll find that you lose more money than you make. Instead, be patient and wait for the very best entries and exits. You can also extend your trading timeframe. Rather than trading within 3 to 5-minute windows — quite a fast pace for even the most experienced traders — consider trading within 120 to 240-minute windows.
Overly focused on win rates. Just because you're winning the majority of the time doesn't mean you're making money as a trader. If your losing trades greatly outweigh your winners, you could easily find yourself in the red with a 75% win rate. If you cut your losing trades quickly and let your winners run, you could maintain a profitable strategy even if you only win 25% of the time.
Not using protection. Don't say 'oops' — use a stop loss. Using a stop loss will prevent your losing trades from being too detrimental. If you're not sure where to set your stop-loss, here's a good rule of thumb: set it 5 to 10 percent below your purchase price. 10 percent means your willing to take on more risk or accommodate more volatile stocks, and 5 percent means you're more averse to losing on that trade.
Not recording your trades. Maintaining a profitable trading account is life running a successful business. You need solid bookkeeping — otherwise, it will be unclear how your money is coming and going. A few important metrics to keep track of include the date and price of your entry and exit, the size of your trade, the direction of your trade (long or short), your profit target, your stop loss, and your final profit or loss.
Of course, our experts have some more ideas on how to avoid these mistakes and ride your trades to extraordinary profits instead...
We all want to open our account in the morning and see an impressive 7-figure income. It's a worthy goal to have, and it's more than possible with the help of our experts here at Raging Bull.
But being in a rush to get there is one of the worst mistakes we can make as traders. Being in a rush causes us to take on greater risk and larger position sizes than we can handle.
So if you really want to make more money, you have to recognize that success doesn't happen overnight. You need to take small steps, and you need to be willing to learn from your mistakes.
In this post, Jason Bond reveals how he transformed his rookie moves into real money gains… like the $113,752.34 he made between October 1 and October 19.
*From time to time, Jason shares actionable trade ideas and teachable moments to his readers. However, they don't always get published on his website, and are often reserved to readers of his free e-letter. If you're not a subscriber and would like to join, click here.
A journal is one of the most overlooked tools in the average trader's arsenal. Very few traders use a journal — let alone even know they should have one.
But all the best traders have journals. Without a journal, a trader has no way of keeping a record of their trading results.
When you use a journal, you can keep track of your wins so that you can analyze what went right with the trades. You can also review your losses -- that way you can learn from your mistakes.
In this post, Davis Martin reveals exactly how to create a trading journal and what to put in it. Before long, you'll be recording a whole lot of observations... like what features did overnight, what stocks jumped or dipped, and what catalysts you could play, among others.
*When Davis Martin isn't busy at waking up at 3 a.m., exercising, and getting ready for the opening bell of the markets, he's writing articles to support his most loyal readers. While some of them are posted on his website, you can receive much more of his best content by signing up for his e-letter. Click here to join for free.
Live Event
On October 29 at 8 p.m. EST, Jason Bond will sit down with Daymond John in a rare event where they discuss the one overlooked options strategy that is delivering everyday people, just like yourself, massive returns. Click to watch the video and reserve your spot.
Most beginner traders are taught seemingly logical strategies like "buy the dip."
While this may sound good in theory, trying to call tops and bottoms — and knowing exactly when a stock is ready for a reversal — is quite hard.
What's easier to do, instead, is "let the trend be your friend." When you follow the trend in the stock market, you are jumping into positions when you observe one of two scenarios: higher highs and higher lows in an uptrend, or lower highs and lower lows in a downtrend.
In this post, Petra Hess reveals how to draw trend lines to identify trends, and she provides one example of a trending stock — Gamestop.
*Petra Hess believes that if you want to succeed as a trader then you must focus on risk management. If preserving your capital while generating consistent returns is something you're after then you should check out her e-letter. You'll learn the steps she took to become a multimillionaire trader. Signing up is easy, and it's free. Click here and you're in!
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