One Common Trader’s Fallacy

One Common Trader’s Fallacy

Each day, we talk to many junior traders and experienced traders. Among them, we often observe the traders rushing for their decision making and order execution. Sure understandable, in trading you need to make an precise decision in short period of time, like Non Farm Payroll or some important data release.

We can’t blame for your hasting in trading. However, if you can do simple math, then you might realize that quality is more important than quantity for your trading.

For example, junior traders often misses the important point about Reward/Risk ratio. They spend a lot of time making money and losing their money in the market and they keep repeating this. This often happens when traders have lost their focus in trading for various reason. For example, they do not care about their rewards/Risk ratio any more. Put this way, if you have a trade with the reward/risk ratio of 5 to 1, then your can earn nearly 10% in one trade per your 2% risk.

10% in one trade is really not bad especially if you are thinking about compounding profits. So making one accurate trading is much more important than having 10 inaccurate trades. Stay calm and at least give some time to think if the market geometry is right to enter before trading.

Unlike robot traders, human traders can capture all the available information until the last minute of the decision making and they can combine many different source of information too. Use these at your own advantage.

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