Do These 3 Things Before Every Trade
You are going to make mistakes while trading, it is inevitable.
Even professional traders at the highest level make the occasional “fat finger.”
This happens when you are not careful about how you are entering your orders or checking your tickets before submitting them.
While this seems like something that would be easy to fix, making sure that every single detail is accounted for during the trading day can be difficult, especially when the market is hectic.
Given the volatility the market has seen this year making sure you are trading accurately is more important than ever. Below I will go over a few simple tips for avoiding fat finger mistakes and validating your orders before you send them.
Tip #1: Check the Ticker, Size, and Price of Your Order
This might seem like a pretty obvious tip, but even professional traders make the mistake of buying too many or too few of something because they entered in the wrong trade size.
The “flash crash” was caused by a mistake like this from an institutional trader who accidentally sent a sell order for 75,000 S&P 500 futures contracts instead of his intended 7,500.
Before you click the send button make sure you are sending an order in the asset you intended, in the size you want, at the price you want. It only takes an extra half of a second to do this but could save you from making a very costly mistake.
Tip #2: Set Limits in Your Account
Most retail brokerage platforms will allow you to set self imposed trading limits on your account or in the trading platform.
There’s really no downside in doing this. You can typically put a size limit or a dollar limit on the orders you submit. Some brokerage platforms will simply reject an order that is above this limit while some will give you an extra warning notification.
This is a great way to put a in a safeguard from a fat finger mistake.
Figure out what you want you limits to be and set them up in the platform to have this extra layer of protection.
Tip #3: Build Templates
Retail brokerage firms typically have platforms that will allow you to pre-build order tickets that you can save as templates.
For example if you know that you generally trade shares of a certain stock by entering 200 shares with a 2% stop loss, you can build a template that sets this up at the click of a button.
By using these templates you cut down on the possibility of building an order ticket incorrectly.
You also can save a ton of time building tickets manually by using these templates.
Using them doesn’t mean you don’t have to double check them before sending them, it is just a way to simplify your processes and minimize the chance for human error.
You’ll Still Make Mistakes, and That’s O.K.
Even if you follow the tips above you will still make the occasional mistake. I have been trading for my entire adult life and I still make an error now and again.
The point of the tips above is to help you minimize the chance for error and to get you to think about how you can be more diligent about your orders.
Don’t let mistakes rule your trading. Learn from them and get better.
AKA, “The Alpha Shark”