#TradeSmart Rule # 1:
“Do ask yourself; are you a Speculator or an Investor”
Have you ever found yourself in a dilemma whether to hold a loss making trade in a hope to exit in profit or to square it up taking a small loss?
If yes, then it is time to take #TradeSmart rule # 1 seriously !!
This is one of the elementary problems every trader encounters in his initial trading career. It is because one finds it difficult to distinguish between a Speculation and an Investment.
Features of Speculation :
- Short term Trade
- Involves smaller part of entire capital
- Adherence to predefined stop loss, targets, trade size and time periods
Features of Investment :
- Trade with longer time horizon
- Significant part of capital involved
- Noise is ignored
- Fundamental valuations are given priority
People tend to switch over from being a speculator to an investor and vice-versa over small market movements.
Ultimately a speculator ends up holding a loss making trade like an investor in a hope for the prices to regain, until significant part of their capital is lost. Also, an investor books small losses after an unfavorable move.
This inability to define the type of trading will result in large losses and continued future bad trading habits.
Don’t let this happen to you. Most of the market wizards determine the trading style that suits them the best and remain committed to it.
If you have not decided yet, think again before placing your next order !!
Also Read : Trading Psychology and Rules