Always Review Your Trades
In days like today, when the US market is closed, it’s really a great time to take this time for stepping back to zoom out and look for the bigger picture. Keep reviewing the trades every day as things settle down allows every trader to learn from mistakes and to focus on the strategies that work best moving forward.
Ultimately, I believe that this phase of going in deep about the whole decision-making process to merely executing orders in the market is an incredible journey that will reveal a lot about yourself and will represent a huge part on winning the challenge and get to the required level of emotional control for being successful.
Today, I’d like to focus on a specific matter that is very important to understand, especially for day traders. As a beginner trader, I had a hard time trading after a breaking news was getting released, not only totally wasting the huge potential behind the event but even losing money when I was getting too stubborn following my own convictions.
Observe the reaction to a news before trading
Here are my three most precious tips on trading a stock that just hit the headlines:
- Do not emotionally react to a breaking news but, instead, observe what impact that breaking news is having on a stock. Is it having a high relative volume? Is it spiking or taking a hit?
- Do not read too much into the meaning of the just released news but watch the reaction to that news into the charts. In this way, you’ll avoid the process of trading based upon your own belief about how that particular stock should react to the news;
- Do not rush to jump on a stock that have been hit by a breaking news. My point is that you simply can’t be faster than an algorithm anticipating the first move. Instead, let it shake out for a while and start looking for a strong setup to form so that you can trade a strategy you’ve been proven to be good at.
In other words, trading a news is an effective exercise of humility: almost none of my self-convictions about what was going to happen after reading a news have been a valuable contribution to a successful trade. Once I stopped believing so I also started saving precious mental resources that I could better use to make way more wiser decisions into trading.
See you in chat-room!