I committed many trading mistakes in my early trading days. I thought why not summarise them so that they will be like a lesson to me which I can read again and again. This may also help those new comers entering into the markets for the first time. It is a series and here I am going to cover the Money Management Risks that I commited.
Daily Loss Targets: I had my daily loss targets. They were 2% of my capital. But on many occassions because of greed and fear I would never stick to this limit. It used to be 4% or 5 % sometimes and on one occassion I remember it was nearly 10%. Because of this the profit I used to earn in a week or a fortnight used to be wiped out by this one single loss.
Fear of losing: There were occassion where I used to move the stop loss further in the hope that the market would reverse – but it never happened. My loss grew more and more. When my trades were in profit I used to fear losing the profit and get out of those trades with a smaller profit. I used to then sit and watch as a fool the price reach my profit target.
What I do now: I strictly follows my plan. Entry, exit and stop loss according to my plan. I never keep watching the charts after entering into a trade and placing a stop loss. When the trade is in profit I see that I allow it to continue upto my target. These changes have brought major benefits to me. I don’t say that I don’t make losses. I make losses but they are as per my trading plan and small when compared to the profits.
I ensure that I read a book or watch a video on subjects like option trading, trading strategies, trading psychology, risk and money management in trading. This is something I do every day. I set aside about two or three hours just for this. I believe that irrespective of our level of knowledge we should keep ourselves updated and be eager to learn new things.