5 Fatal Flaws of New Traders
Jeffrey Kennedy of Elliott Wave Junctures discusses the major mistakes that often keep new traders from becoming profitable.
If you've been trading for a long time, you no doubt have felt like a monstrous, invisible hand sometimes reaches into your trading account and takes out money. It doesn't seem to matter how many books you buy, how many seminars you attend, or how many hours you spend analyzing price charts, you just can't seem to prevent that invisible hand from depleting your trading account funds.
That brings us to the question, "Why do traders lose?" Or maybe we should ask, "How do you stop the invisible hand?"
Whether you are a seasoned professional or just thinking about opening your first trading account, the ability to stop the hand is proportional to how well you understand and overcome the five "fatal flaws" of trading. Each fatal flaw represents a finger on the invisible hand that wreaks havoc with your trading account.
Fatal Flaw 1: Lack of Methodology
If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. Guessing or going by gut instinct won't work over the long run.
If you don't have a defined trading methodology, then you don't have a way to know what constitutes a buy or sell signal. Moreover, you can't even consistently identify the trend correctly.
How to overcome this fatal flaw? Write down your methodology. Define in writing what your analytical tools are, and, more importantly, how you use them.
It doesn't matter whether you use the Wave Principle, point and figure charts, Stochastics, RSI, or a combination of all of the above.
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