On this page we’re going to look into the concept of negative and positive trades.
We’re going note that good deals are a result of making ‘good trading decisions’ but alas may still have ‘bad outcomes’. fusionex
Alternatively, bad trades are a result of making ‘bad decisions’ and on occasion could possibly bring about ‘good outcomes’.
The trader’s best tool in breaking the mildew of most novices who lose wads of money in the market is to focus only on making good trades, and worrying less about good or bad outcomes.
In our Workshops we make an effort to deliver students strategies which help identify the best trades to suit particular and personal trading specifications. We now have an amount of trading strategies that can be used to reap rewards from the stock market, with each strategy by using a particular structure or ‘setup’ to formulate a smart trade. Most traders however don’t have such a structure, and as a result, too often give in to the dreaded ‘impulse trade’.
This is a typically overlooked concept in committing literature and refers to an unstructured, non-method, or non-setup trade.
Succumbing to Spontaneity
We’ve all recently been there!
You look at a chart, suddenly start to see the price move in one direction or the other, or the charts might form a short-term routine, and we jump in before considering risk/return, other open positions, or a number of the other key factors we need to think about before entering a trade.
Different times, it can feel like we place the trade on computerized initial. You could even find yourself staring at a recently opened position thinking “Did I just place that? ”
All of these conditions can be summed up in one form – the impulse control.
Impulse trades are bad because they are performed without right analysis or method. Successful investors have a particular trading method or style which serves them well, and the behavioral instinct trade is one which is done outside of this usual method. That is a bad trading decision which causes an undesirable trade.
But why would a trader suddenly and spontaneously break their valid trading formula with an impulse trade? Surely this doesn’t happen too often? Well, however this occurs constantly – even though these transactions fly in the face of reason and learned trading behaviors.
Even the most experienced traders have was a victim of the instinct trade, so if you have done it yourself may feel too bad!
Just how it Happens
If it makes no sense, why do traders succumb to the impulse trade? Since is usual with most bad investing decisions, there is quite somewhat of structure psychology behind it.
In a nutshell, traders often succumb to the instinct trade when they’ve recently been keeping bad trades for very long, hoping against all reason that things will ‘come good’. The situation is exacerbated when a trader knowingly – indeed, willingly – places an impulse trade, and then has to deal with additional baggage when it incurs a loss.