Common Pitfalls in Prediction Markets and How to Avoid Them | Value Network

Common Pitfalls in Prediction Markets and How to Avoid Them


What difficulties does a prediction market trader sometimes face? What traps lie in wait for him on the way to success?

There are a lot of traps, which is not surprising. But we will focus on the three most characteristic ones, which often lead to very serious consequences.

Let’s start with such a common one as overexposing a winning position. This can be explained with a simple example. The trader does not close the winning position since, in his opinion, the desired level of profitability has not been achieved. At the same time, it often does not move the stop loss. As a result, the following happens: a trend reversal, knocking out the trader by the “stop.” We are not talking about profit here; it is good if the position is closed “to zero” and not with the loss of money. Could this have been avoided? Sure. The first is to always stick to your trading system and not give in to emotions. The second is to use robotic assistants. The third is to determine in advance the stop loss and take profit, even before entering a trade. This way, you can avoid the trap of overexposing winning positions.

The second pitfall is related to the trading account. More precisely, too strong an obsession with what is happening to him and whether some of the funds have been lost at a certain stage of trading. In fact, the trader is not guided by fundamental or technical analysis but by the number in his account. For example, as a result of an unsuccessful entry into the market, a trader lost 15 thousand rubles. He chose the next position correctly, but as soon as he returned the above amount, he closed the deal. At the same time, the market continued to move in the right direction, and there were no real reasons to make this decision. But the psychological factor played – to return the losses. However, in the end, it all ended in lost profit, which cannot be called a success. What to do? Payless attention to the state of the trading account, start counting not received/lost rubles but points in transactions.

The third trap is very trivial and again affects the psychological characteristics of a person’s personality – the experience of making mistakes. But tell me, who is not wrong? Is that the one who does nothing? We are talking about an interesting and multifaceted field of activity, in which there is also a factor of unpredictability. With experience, there are fewer mistakes, but novice traders have more than enough of them, and … this is completely normal. You shouldn’t dwell on what happened in the past and let it influence the current situation. For example, how many cases were there when traders missed great opportunities to make money just because once in a similar situation, the market made a sudden reversal, and their position was closed with a big minus. So what separates a successful trader from a loser in this field?

– Focus on the future, rather than experiencing past failures and self-pity;

– Thoughts about how much money he can make, not memories of all the lost funds.

Even if something didn’t work out today, it would work out tomorrow. The market was and will be, as well as opportunities to earn/return losses on its movement. To do this, you need to:

– scrupulously follow your trading system
– a new day = a blank slate
– actions clearly according to the algorithm.

We have covered just a few of the common pitfalls of trading. As a global recommendation, you can advise periodically reviewing their entire list, analyzing your behavior in the market; they say, am I making an obvious mistake now?

Do not be lazy to work on yourself both in terms of developing personal qualities (discipline, composure, etc.) and replenishing your knowledge base, studying the theory and experience of successful predecessors. Another option is to use the services of a professional trader, giving him the right to manage your trading account.


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