Last week we gave out a few bad trading habits that many of us seem to suffer from. However, we are all different and have certain habits that make us feel comfortable. Yet, some habits should be broken and not encouraged, as they will make us vulnerable. I asked some of my close colleagues in the chat room what habits they could identify that hinder their performance, and which ones they need to break. Some of these are below. Your job - if you identify with any of these, change your behavior to create a positive outcome.
Holding Positions Too Long
We all want to make the maximum amount on the trade. The drill being 'buy at the low, sell at the top'. In fantasy, that can work every time we wish, but in reality it happens far less. But if we are in the mindset of extracting out as much as we can then we are telling the market what we want it to do. Bad move, you'll be taken to the woodshed and shot. Better idea, take the move of a stock or option in context, recognize how far that trade has come and take some or all off the table. Holding positions far too long is a mistake I see happen all the time whether a gain or a loss. Be an individual and not like the crowd - know your own thresholds of risk and move accordingly.
Rolling Up Profits ASAP, Not Being Patient
As option traders we run into this often. We have a nice gain and are ready to take profits, but want to stay on the train. More often than not after rolling up higher or to a longer strike that trade goes in the hole. Our excitement and enthusiasm don't allow us to step back and take a break. Next time, take that needed break and just wait for a new entry point. Charts are extremely helpful.
We have all fallen into this trap at one time or another. Do you feel you have to trade all the time? Is there some urge of need to get a trade off? Do you get bored and fire off a trade 'just for entertainment'? Stop doing that! This is a place for patience, waiting for the right setups and executing as best possible. 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. If you're bored - go outside, take a walk or just step away for a bit. That rush to fill a trade need will soon go away, then you can focus and concentrate.
There are many other habits of traders that cause pain and frustration, these are only a few. Identify the ones that affect your performance, figure out what it takes to change and do it!