When I first started trading I believed that just picking the best trades is the way to make money trading. I have learned that is only half the battle (and not the most important one). I have learned that holding good trades is the biggest battle you will face. Managing a trade correctly, cutting a lose quick or letting a profit run, is the biggest battle and the key to trading consistently. (at least for me.)
So what about you, what is/was your biggest misconception when you first started trading?
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Mine was I was clueless about how hard this was gonna be. I thought I could learn a set up and just repeat it every day....and while there is some measure of truth to this, implementation is much harder than it sounds.
The other misconception was how much of this is mental vs tactical. I tried to tell someone recently their mistakes were all mental and emotional and they refused to believe me....instead they went back on the holy grail hunt.....I guess most people need to figure this out in their own way.
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
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One of my many misconceptions about trading: there are absolutes in trading and by following them you can win. What I learned; The only absolute in trading is there is no absolutes in trading; Go figure..
Another misconception when I first started: I thought I could easily bring in 500 to 1k a week simply by trading stocks. You know.... Buy low Sell high. The e-trade commercials made it look easy!!
Biggest misconception of all: believing there is holy grail and that I could find it.
nosce te ipsum
Trade what the market is doing; NOT what you think its going to do.
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It was December, 2009 and I was getting used to my new platform - TradeStation. The first vendor I paid to "teach" me how to make millions made it sound very simple. He introduced me to range bars and taught me a method that will scalp 2 ticks for every 8 ticks ES moves. I was ecstatic. It was simple, place a limit order at the close of the bar, to buy if the bar closed below the open and to sell if the bar closed above the open - basically fade the close, and exit with 2 ticks profit, stop loss is the close of the entry bar in the opposite direction if it fails to reach 2 ticks.
I manually traded this in SIM for a short while and I think made > $10K. I automated it and the backtest had a perfect 45 degree equity curve with 80-85% winners. I was speechless. I was jumping up and down with pure elation and showing my wife, every opportunity I got, how great I was to have found something as simple as this and all I had to do was work 2-3 hours a day and we are going to be millionaires, I had spreadsheets showing how I will scale up with parabolic projections etc etc.
There were many misconceptions but this one stands out because it is still hilarious
I still see so many people coding away in search of that perfect system without realizing that SIM does not equal live trading and most backtests are deceptive. Theory is just that - theory, application is what matters.
I wish I had realized the meaning of this quote earlier:
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