On Time Frames and Over-Trading

Since joining Twitter, I’ve had a number of conversations with Trade Report members who also use twitter. I’ve found a common mistake between twitter users, and that is over-trading and not understanding time frames.

Yesterday, a member told me he had entered one of my focus list stocks. I asked him why, since it was not near the entry point that I had suggested. He said somebody that he follows on twitter has suggested that same stock and had taken a position.

The stock is down over $1.50 today and is now near entry level. Meanwhile, the trader report member who entered is down 5 percent on the trade and needs to exit before support levels, or the loss could get too big for his account.

I did a little research on the “tweets” that suggested the stock, and it turns out that the person who suggested the trade is a daytrader. He would have been stopped out of the trade long ago for a minimal loss, and was looking at support levels mean for a daytrader, not swing trader.

The loss the guy on twitter took was perfectly acceptable, but only on his own time frame and trading style. However, the Trade Report member, who traded it as a swing trade, made a major blunder. He traded the stock without a plan and under the wrong time frame.

This is a common mistake amongst traders. Make sure when you follow a recommendation on twitter or anywhere else, that you know the trading style of the person recommending a stock. Then do your *own* analysis and see if the trade fits your trading style, risk and trade management principles.

Another common mistake that is prevalent with twitter users is becoming trigger happy after reading about what other traders are doing. There are a lot of great tools out there (when used properly), but one must stay disciplined and stick to their own, effective trading style.

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