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I have made many trading mistakes over the years but the worst of them have all stemmed from a single cause: trading too large a position.
My advice is to trade small, especially at the beginning. If you're tempted to trade 1000 shares, trade 100 instead. Large positions mess with your head and cause you to make emotional errors.
Revenge trading - don't do it. If you find yourself obsessing about a big loss/mistake then stop trading until you're over it even if it means stopping for the day.
After every loss or win now I take a 5 minute break before taking any new trades. It actually helps.
They say, thre are 4 types of trades: 1. Big winner
2. Small winner
3. Small looser
4.Big looser
A trader need to avoid only one trade - Big Looser. sounds simple
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Interesting there are proponents for both fewer bigger trades vs. scalp trading. With the usual cons being bigger losses vs. over trading. I would like to think both have a respectable place in trading and neither is invalidated nor unrecommended for a student trader.
I try to discourage scalping simply because most people over trade as it is, and scalping makes things 100x worse. In addition, you are at a severe disadvantage when scalping due to latency and entry costs (transaction costs). Let the machines do what the machines are better at, which is scalping.
Scalping also tends to lend itself to people making the worse trading decisions, like having much bigger stops than targets.
That said, as always, there is no right/wrong. Obviously there are a lot of traders that do exceptionally well scalping, even paying "level 1" commission prices (full retail), with no major discount level, no seat discount, and even doing it from far away countries with high latency. I think like most things in life, anything is possible
But I think that most people simply have a higher chance of success if they will not scalp. People tend to think scalping is the only way to minimize risk ($$$). Instead it is death by a thousand cuts, for most. If they would trade bigger chart time frames, bigger targets, and bigger stops --- while reducing their position size or trade a micro instrument --- they will achieve the same small risk $$ while increasing the chance of success.
Naturally, nothing is free. Trading micro's has a higher transaction cost than trading full sized futures. So you just need to find the sweet spot that works for you.
At the end of the day, I think that beginners probably have more luck swing trading than they do day trading, however. And scalping is at the far end extreme of day trading, meaning it is 100x more difficult to be profitable.
Never bet the farm, your family and your current/future children are counting on you.
On the top of my monitor is a sticky it says:
Preserve Precious Capital
Oddly you will find that money management beats having an edge.
Forget about finding the perfect indicator or system.
Instead, buy with care, jump out at the first sign of trouble and trade small, very very small.
Don't try the ES until you can beat the IWM.
Don't try the IWN for real until you can sim trade it.
More about money management here:
Learn the idea that casinos don’t make there money based on the “edge” of the game but in fact do make there money based when the player runs out of money. Dr. Tharp and Ralph Vince talk about the risk of ruin even in a game 60% in your favour.
Here is a copy found all over the net: https://www.otrader.com.au/dloads/difficultmakemoney.pdf
What this says is that a casino would still win even in a 50/50 game like coin toss.
Also in effect it says if you built an automated trading system that can win 60% of the time, if it bets a big part of your account, it will still blow up your account. We know this as getting through a drawdown.
Good points about scalping side effects Big Mike. I've noticed I have a harder time going for and holding out for bigger targets and how to trade runners since I've been habituated on scalping the last 6 months. And this is a hurdle I need to work on as well as exposing weakness in entry and setup recognition since a scalper tends to trade off of a much smaller focus on the charts of the smallest time frames. I probably stand corrected in that maybe it's better for most new student traders to learn how to trade for at least 10, 15 ticks depending on instrument, and learning to adjust risk/reward ratio and getting confident that way before learning to scalp so as not to be limited as much by the habits formed from scalping alone. I'm not a 5+ year daytrader, more an almost 2 year, so just my personal experience.
