Distinguish context from entry in trading.
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Many beginner traders confuse setup with trigger, which leads to unconsidered decisions. Let's take the situation where you see a potential setup for an increase in the stock price of company X. Without a clear understanding of the trigger, you decide to buy 100 shares at 100 zł each. However, the price drops by 2%, and you lose 200 zł. Another mistake is ignoring the spread. When buying shares for 100 zł with a 2 zł spread, you have to wait for the price to rise to 102 zł to break even. The third mistake is not setting a proper stop loss. You enter a trade without protection, and the price drops by 5%, resulting in a loss of 500 zł.
The main problem is the lack of distinction between context and entry moment. A setup is just a potential situation that may lead to a trade, but it doesn't have to. A trigger is a specific event that confirms it's time to act. Ignoring this difference leads to decisions based on assumptions rather than facts. The lack of a trigger in a trade is like opening an umbrella in the sun — an unnecessary action.
Assume you have a capital of 15,000 PLN. You enter a transaction with 10% of that capital, which is 1,500 PLN. Due to a lack of a clear trigger, your transaction ends with a loss of 3%. You lose 45 PLN on one transaction. Repeat this ten times in a month, and you lose 450 PLN, which is 3% of your total capital. In the long run, such thoughtless actions can reduce your capital to zero.
To improve your results, implement a few key changes:
Start recording your setups and triggers in a journal, analyzing their effectiveness.
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