Written by: Joel Abiola Olatinwo
1. Lack of insights (Not lack of general knowledge).
2. Wrong use of technical tools.
3. Timing.
When all the three aforementioned reasons combine against the trader, s/he is bound to lose his/her trading account.
What is insight?
Insight is defined on dictionary.com as "an instance of apprehending the true nature of a thing, esp. through intuitive understanding," but I think it is best defined as a keen understanding of the subject matter.
Example: It is generally believed that when a market/security rallies or plummets for a period, the security would pull back or retrace for another time period. While this is common knowledge, many traders do not avail themselves of this truth.
There are several ways to approach any trading instrument for a profitable adventure, but without learning from someone who is walking the path, the trader would have to rely on his/her personal experience; and the cost of experience in this trade can be exorbitant. Finding the right person to learn from is another challenge, however.
2. Wrong use of technical tools:
This is perhaps the most prevalent mistake and frustrating aspect of trading. Many traders have bailed out of the market because they believe that technical analysis does not work. To them, technical analysis is a myth! The problem is not technical analysis but the wrong use of technical indicators. No technical indicator is designed to predict the future. With the exception of Moving Averages, technical indicators are mostly oscillators; and the basic function of oscillators is to follow the underlying security and compare the current performance with the immediate past performance. So, when traders rely on oscillators to predict market's direction, they are running ahead of time.
3. Timing:
While predicting market's direction with 100% certainty is impossible, timing is another trading aspect that many traders find very difficult to master. Timing the market amounts to guess work if the trader relies on the cross-over of oscillators. There are, however, technical tools designed to provide common sense approach to timing. Many traders have lost their accounts because when they thought the market was headed up it plummeted; and to worsen the situation, losers are usually infected with the wait-for-trade-to-recover syndrome.
The above is a summary of what all losing trades have in common. Money management was deliberately excluded from the reasons stated above, because when all other factors are wrong, money management simply helps to bail out of the market at a predetermined price level.
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When I embarked upon the project in "True Trend," I deliberately chose the most difficult premises:
1. The chosen trading instrument was Equity Options; and Option is a derivative with negative expectancy. Time decay and Volatility are no easy hurdles to cross.
2. The trading approach was neither Debit or Credit Spread but the least favored Options approach - outright purchase of Calls or Puts.
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3. The trading Capital was rather limited!
The e-book "True Trend" contains several charts with detailed explanation on how to capture a true trend. You can adapt the explanation in "True Trend" to any financial market and trading system.
It also contains detailed information on counter trend. Counter Trend is the reason most technical traders often experience frustration. You will read where to check for counter trend and how long it is likely to lasue tt. You will learn what time frame to trade for your preferred trading instrument. And finally, you will discover what to expect of Trend movement on any time frame.
Thanks.
3. The trading Capital was rather limited!
The e-book "True Trend" contains several charts with detailed explanation on how to capture a true trend. You can adapt the explanation in "True Trend" to any financial market and trading system.
It also contains detailed information on counter trend. Counter Trend is the reason most technical traders often experience frustration. You will read where to check for counter trend and how long it is likely to lasue tt. You will learn what time frame to trade for your preferred trading instrument. And finally, you will discover what to expect of Trend movement on any time frame.
eMail Address: coach.expert2020 [@] gmail.com.
Thanks.
Joel Abiola Olatinwo
