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Factors to Avoid - Trigger shy phenomenon

 

 

 

"Fortune favors the Bold"

A lot of novice traders get hit with something we call - The trigger shy phenomenon. It happens at the point at which, the traders have seemingly mastered their system, but fail to pull the trigger on the trade. They do not have the courage to implement their system. They have paper traded upto this point and verified to their heart and mind's content that the system is pretty accurate. But yet, they falter at the last moment...the moment of action.

The reasons (excuses) they provide themselves to not enter the position are diverse, some of them being,

  • The market is overbought. Entering position on the long side now is risky.

  • The analysts on TV are saying a correction is imminent. I wll wait for that.

  • The position I wanted to buy, has gapped up and gone past my entry point. I will let this go.

  • Everyone I know is selling now. Why should I buy, even when all conditions tell me to buy?

  • Maybe I will paper trade just ONE more time....

 

Basically, it all boils down to the willingness to take the risk. And it is a real risk. Trading and Investing come with risk. That is the reason, they also come with greater rewards than the bank issued CD's and savings interest.

 

Candlestick traders have a a huge advantage here. They know precisely the risk level (stop loss) before entering a trade. This risk level is not any arbitrary percentage or some number pulled out from thin air, but a level which signifies change in investor sentiment in that stock. (Stop loss settings are covered in depth in our Basic and Advanced courses). Candlestick analysis gives the trader the confidence that his hard earned money is only being put at risk, where the probabilities are extremely high that the trade will go in his/her favor. Sure, sometimes the signals will fail. But the key here is that the risk is well defined, with reason, before hand.

 

Once these signals are mastered and all parameters defined, putting on a trade becomes more of a mechanical process.