Steve Cohen talks about trading mistakes in his stock market wizard series.
There is value in analyzing Steve Cohen’s trading style. For those of you in the game, Steve Cohen needs no introduction. The 64-year-old trader is a grandmaster of the game. Steve Cohen is a legendary trader with a net worth to match (13 billion USD, 2017) making him the third highest-paid hedge-fund manager and the 72nd richest person in the world.
Steve Cohen, the founder of point 72, manages hundreds of traders.
“Steve Cohen is a legendary trader with a net worth to match (13 billion USD, 2017) making him the third highest-paid hedge-fund manager and the 72nd richest person in the world”
WEALTH TRAINING COMPANY
Making trades without a good reason is number one on Steve Cohen talks trading mistakes series
Steve Cohen insists that there should always be a justification for a trade. While Steve Cohen does not go into the decision-making process, he insists that there has to be a reason for the trade. So, look for a technical and fundamental rationale for making a trade. Also, that the risk-reward ratio is okay.
If you don’t have a good reason to place a trade, then most of the time, it ends up being a loss-making trade.
If you can’t explain why you have placed the trade in a few sentences without having to think, because you have already thought beforehand, then you fall within number one of Steve Cohen talks trading mistakes. Steve Cohen recommends that you liquidate a position unless you knew the reason or justification without hesitation why you placed the trade.
“If you don’t have a good reason to place a trade, then most of the time, it ends up being a loss-making trade”
WEALTH TRAINING COMPANY
Stepping in front of freight trains is second on Steve Cohen talks trading mistakes series
In other words, if the momentum of the market, is strong in one direction be cautious if you decide to go against a strong trade. So, whether you are a swing trader or momentum trader, when momentum is strong and solid, pay extra attention to technical analysis if you are contrarian trading, let the dust settle.
“There has got to be a good reason why you decide to short a stock that is up” – Wealth Training Company
Shorting stock just because they are up also featured on Steve Cohen talks trading mistakes series
There has got to be a good reason why you decide to short a stock that is up, such as a poor balance sheet, or the company is losing out to the competition.
Finally, Steve Cohen talks about trading mistakes concerning knowing who you are and who you are not
For example, if you are a day trader or a swing trader, stick to your trading style. If you trade based on the fundamentals stick to that. Stick to what you are good at, whether it be currencies, commodities, bonds, or stocks, and do not try to be a jack of all trades. Focus on an area where your skill set lies and master it.