Many traders, especially beginners try to predict the market and often face huge losses. Although most markets behave in a cyclical manner, this cycle isn’t that much predictable – especially for short-term traders. There are many things which influence the market performances and no single trader can consider all those at the same time. Here are important things/facts to consider.
- No trader can accurately analyze all the forces and factors which influence the market direction or the financial instrument price.
- There is always uncertainty in the market.
- A good trader determines the possibilities with most accurate information to which he has access; and makes a trading decision with regards to the greatest possibility.
- The trader then hedges against the other possibilities by using some strategies.
- He constantly monitors the market/product and recalculates the possibilities and changes his trades with regard to the change of possibilities.
- Inexperienced traders often calculate the possibilities correctly and start trading with respect to the greatest possibility like good traders; but they do not hedge against other possibilities.
- Inexperienced traders often stick with their first decision and do not make changes with regard to changing possibilities; and then suffer losses.
- Successful traders make right decisions at right time while inexperienced traders make delayed or early decisions.
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