Exactly 10 years ago, there was a catastrophe on the stock markets throughout the planet. And all the species of trading and investing world were bleeding and nervous due to heavy selloff across the board. There were traders who were holding a Long positions losing bigger chunk of their savings on their account every day as the markets fell. There were many such traders. Vis-a-vis there were Short sellers who used to make money keeping shorts open and closing every day or in a weeks time and enjoying the selloff. There were not too many traders of this dna.
Whats the point ?
The point is, Do you as a trader take only long trades ?
or Do you always take only short trades ?
Again there is nothing right or wrong about it. But if you are minting money or not. Specifically if you are a trader you should be making money either side of the market. A trader needs to sit in right side of the market. By right side I mean the prevailing trend in the market. If the prevailing trend in market is Up he needs to have maximum Long trades as compared to Short Trades & vice versa.
But, a general observation is most of the traders are prejudiced towards their trading ability say long trading or short trading. In any of the market sentiment or trend they can only trade in one direction. Which is very risky. If a long prejudiced trader keeps on trading only long despite during negative trending market, he is bound to blow his account. Similarly if Short seller keeps on shorting in an upward trending market he will also always be sitting on the opposite side and hoping & praying for his rates.
Characteristics of Long & Short Prejudiced Traders
Long Prejudiced Trader
- When it comes to take trade, they will go and buy by their natural force.
- When the market starts falling they will look for the next level when the stock go cheap and hunt for fresh long entry. Till then they keep aside.
- If stuck in long position despite negative trend they may hold on to the stocks to whatever time period (they lose opportunity cost during such period)
- Sometimes they may enter in a long position prematurely (trying to time the market)
Short Prejudiced Trader
- When it comes to take trade they will go and short in every rally they see sometimes prematurely.
- They may sometimes short a strong uptrend and blow their account.
- They keep on averaging on every advance for them in each rally when the stock they are tracking shoots up they say its over run, how can it go that high, & they short sell it.
- When the market is in negative trend they book hand some profits.
- They feel nervous in long trade as if the market will open widely negative for whatever reason and they have a feeling of losing.
Questions to ask yourself ?
1.Do you belong to any of the league above ?
2.Which side do you trade often Long or Short ?
3.Do you always find the next level to long or short OR do you trade with current trend?
If you could find the answers to these questions I am damn sure you will definitely improve your trading style and get better results.
“For every trader the only mandatory rule is he has to be sitting to the right side of the market.” _ Chandrakant Deo
#PS : To identify what is your prejudice, just check your account and see how many long trades for how many short trades you have taken in previous 3, 6 or 12 months.
I hope you enjoyed this post. Stay tuned for my next weeks post till then
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A trading Method
A trading Mindset
A trade record keeper
A money manager
A good market analyser
Though these are just the few qualities, a successful day trading is not just qualities but a process driven mechanism.
A trader once sworn as Day Trader needs to follow some daily routine what is that routine. Know more about this.
Let me ask you bluntly,
Do you have the mental makeup that is required for day trading?
Do you know what kind of trader you are?
Do you know what are the things you need to ignore during day trading?
Have you been day trading since long but yet to taste success in it?
“Successful traders know that making money is more important than being right”