One Crucial Stock Market Trade Mistake To Avoid

There are lots of stock market trade techniques

. A lot of investors however still manage to fall into abysmal pits that aren't easy to get out of. Many of these investors end up losing because of the same mistake. If you don't want to end up in the same state, you have to learn to distinguish this error and steer clear of it.

This common horrible error is placing too much stress on the importance of trade entry signs. Some traders imagine that they can isolate an indicator that will provide a flawless entry. They ultimately think that this perfect point is also what determines the start of an upward trend. This one indicator is also what they rely on to identify when an exit should be performed.

In actuality, perfect trade entry indicators are myths. People who continue to follow this phantom belief are in line for disappointing losses. Some of investors who think they can get perfect entries really know deep inside that there is no perfect entry point. They still make the hardheaded choice to continue looking for one because of psychological reasons. They gain a false sense of control just because they are the ones responsible for giving the go signal on a trade. This sense of control covers not just the entry but the entire progress of the trade itself.

It's true that you can sometimes hit the mark when you are about to enter a trade. There is no reason to believe though that you can tell a trade exactly how it should go. It is impossible to determine the results or outcomes of a stock market trade. Moreover, the stock market will behave the way it will without special regard for your personal wishes.

Of course, planning where and when to enter a trade is an important part of any trading system. It is not however, the most important element of all. Ultimately, it is not your grand entrance that will determine how much you will earn. What will secure your profits are your exit and your money management rules.

When taken as a whole, entry, exit and money management all make up your system. In some expert circles, your points of entrance and exit are taken under the context of the much greater concern of cash management.

This term may sound a bit technical for stock market trade beginners. It is however, a lot simpler to understand than you think. The other more definitive term for it is risk management. As the term implies, this is a set of rules or guidelines that will set the risk level that you are most at ease with. With such guiding points in place, you are able to maximize your profit potential without losing more than what you are willing to let go of.

Many things are involved in managing risk. It's easy to think at first that all you need is to identify how much cash you are willing to let go of. Real comprehensive risk management plans however also put under consideration such factors as trading float, stops and trade size.

To summarize, you should avoid creating a pedestal for perfect entries. You should still make good entry rules but make sure you pay even more attention to your risk management rules. A risk plan that you approve of is the one key to trading satisfaction.

by: Reece Mathews

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