One of the most common mistakes made by retail investors worldwide is the tendency to hold onto losing positions for too long while selling profitable ones prematurely. This behavior stems from focusing solely on account profits rather than paying attention to critical indicators such as market trends and trading volume. To succeed in trading, one must reverse this mindset—allow profits to grow and cut losses early. The key to success lies in maintaining a disciplined approach: set clear stop-loss and take-profit levels.
For instance, my strategy involves taking profits only when gains dip to 15% after rising, allowing profits to run if momentum continues. On the other hand, if a position incurs a loss exceeding 5% of the principal, I immediately exit. Even with a 50% win rate, applying this method over 100 trades can yield a 300% return. The real challenge, however, is managing the psychological pitfalls of greed and fear, which often lead to impulsive decisions.
The cornerstone of effective trading is to follow the trend. Once a trend establishes itself, there’s no need for excessive analysis—simply align with the market direction and avoid speculating or making assumptions. Trends can be easily identified using moving averages; for short-term trades, monitor daily averages and volume breakthroughs, while medium- to long-term trends are better judged by weekly averages.
Always avoid trading against the trend or attempting to catch falling prices in a downward market, as the probability of success is significantly lower. Focus instead on high-probability opportunities, and be quick to admit mistakes or cut losses. The ability to control risk is far more critical to long-term survival in the market than securing short-term profits. For short-term trades, study 15-minute, 30-minute, and 1-hour charts, using indicators like KDJ to pinpoint entry and exit points, and OBV to assess the intentions of large market players.