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Fatal day trading mistake #1 - struggling to identify the direction of the market - if you know the pitfalls of trad� ing, you can easily avoid them. But these are forgivable, with luck, and, even profitable.
Small mistakes are inevitable, such as entering the wrong stock symbol or incorrectly setting a buy level. - what you have to avoid, are the mistakes, however due to bad judgment rather than simple errors. To avoid these pitfalls, you have to watch yourself closely and stay diligent. These are the" deadly" mistakes which ruin entire trading careers instead of just one or two trades. Think of trading mistakes like driving a car on icy roads: if you know that driving on ice is dangerous, you can avoid traveling in a sleet storm. One of the first mistakes new traders make is sinking a lot of wasted time and effort into predicting legitimate trends. But if you don' t know about the dangers of ice, you might drive as if there were no threat, only realizing your mistake once you' re already off the road.
Traders can use very complicated formulas, and systems to, indictors identify possible trends. - the problem is that they lose sight of simple decisions about when to buy and when to sell. They' ll end up plotting so many indicators on a single screen that they can' t even see the prices anymore. The mistake here is trying to understand too much at once. This is almost always an illusion. Some people think that the more complicated their system is, the better it will be at" predicting" trends.
Depending too much on complicated systems makes you completely lose sight of the basic principle of trading: buy when the market is going up and sell when it' s going down. - complicated indicators only obscure this information. Since you want to buy and sell early in a trend, the most important thing to discover is when a trend begins. Remember to keep it simple: one of the easiest ways to identify a trend is to use trendlines. Trendlines show you the lower limits of an uptrend or the upper limits of a downtrend and, can help you, most importantly see when a trend is starting to change. Trendlines are straightforward ways to let you know when you are seeing an uptrend( when prices make a series of higher highs and higher lows) and downtrends( when prices show lower highs and lower lows) . Once you get comfortable plotting trendlines, you can use them to decide when to start taking action.
Moving averages, and the Relative, turtle trading Strength Index( RSI) are some examples of more complex indicators and systems that are available. - only after using these early indicators should you start using more specific strategies to determine your exact buy or sell point. But only use them after you' ve determined if the market is trending or not.