Why does the stock price move against me when I take a trade? – Life Hack for Traders
The most frequently asked questions by beginners are ..
Why do prices move in the opposite direction whenever I take a live trade?
When I do demo trades, I’m fine. But whenever I make a real trade, the price moves slightly in my favour before reversing. Why is this so?
When I exit, it returns to the preferred direction. What do I do?
It simply means that you lack the confidence to take a trade.
I understand how difficult it is. It’s confusing and frustrating.
All of the other traders appear to be very confident in their trades. They appear to know what they’re doing. They don’t even seem to be concerned about the losses.
I was absolutely amazed by the youtubers who do live trading and book profits in under a minute.
But I was determined to learn whatever it took until I succeeded. I switched strategies because I discovered that all of them gave me contradictory signals whenever I entered a trade.
Then I realised that you have to understand why everything happens rather than just blindly following the strategies taught by so-called “trading gurus.”
When I began to understand price action and why the market behaves in this manner, I was able to control my emotions even when I was losing a trade.
Because I now understand that a loss is most likely due to market conditions rather than my error.
Sometimes the market reverses for no apparent reason. And that’s fine. You will be profitable as long as your money management rules are followed.
Then I discovered that price action is the most important factor, and if you are struggling after taking a trade, it is most likely because you are unsure of your strategy or are emotional while trading live.
It will be difficult to remain calm during trading if you do not understand the reason for your entries and exits. Because not controlling your emotions while trading can lead to more losses.
You must understand that the price will almost always move in the opposite direction before you can profit. This is called a pullback.
All you have to do is distinguish between pullbacks and reversals.
Undoubtedly, pullback and reversal are two of the most confusing decisions ever to be made in the stock market.
So, how do you do that???
Determine whether the price movement in the opposite direction is merely a pullback or a reversal.
There is no need to be concerned if it is a pullback. It’s bound to happen. Moves with no pullbacks are referred to as impulse moves. It is better to avoid an impulse move if you are a beginner.
But if it is a reversal, you can exit the trade. Whether it is a stop loss or a target, you can exit your trade without hesitation.
How to differentiate pullbacks and reversals?
As you learn more about trading, you will realise that the market only moves in three directions.
Whether trending upwards or downwards, there is always a pullback. If it turns and breaks the previous pullback, it indicates a reversal.
For example, if the price goes from 70 (swing point) → 100, then it might reverse till 90 before going to 120. This is called a pullback. If it breaks down below 70 and continues, then it indicates a reversal.
If you are confident in your strategy, the issue is managing your emotions. If you’re doing well on demo trades but feeling this way about live trades, it’s most likely because you were emotional during your live trade and made a bad entry.
This issue can be solved by keeping a trading journal in which you track your trades and emotions.
Then you can figure out which emotions are repeated.
To resolve those emotions, use the 5 whys technique to get to the bottom of the problem.