Lessons learned - part one

I want to write about some important lessons i learned recently. I hope it helps you as well.

1. Emotions affects trading - You woulnt believe how much emotion effect trading. If you are in a bad mood this will effect your trading wheater you like it or not. So first clear your head and put in order your emotions.

2. Consecutive losses - even the best traders have experienced a time of consecutive losses. They will impact your trading and your emotions. This will happen more often that you are prepared for. Be ready

3. Too much winnings - will disrupt your emotions. Trader often feel overconfident and cocky. This is the time they are not on the edge all the time and sooner or later mistakes occur. Dont become overconfident if you are have a winnin streak.

4. Position sizing - one way to hurst your trading is position sizing. Too large positions hurt your portfolio and hurt your emotions. This can trigger exaggerated emotional swings in either way.

Using stop losses

Did you know that almost 90 % of all trading is done by automatic trading which is done by computers using algorithms. Only 10 % of trading is manual. All the big firms like Goldman Sacks have algorithms that have an ability to learn when market changes. They are capable of moving stock or ETF in one direction if they wish, because of the funds that they have. Can you imagine all that power?

I noticed in recent moves in the market, that algorithms tend to push index or stock over resistance to trigger stop losses of short sellers. And this happens all the time. Conditions in market have really changed. Do you remember flash crash? Flash crash is obvious example of electronic trading combined with a lot of funds backing up this algorithms. They can do a lot of damage as you can see from flash crash example. There are also examples of resistance broken only to trigger stop loses and then comes back under resistance. This play back and forth is very frustrating for traders. Maybe the best answer is not to put stop loss just above resistance, because of the poped stops.