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For example, a very experienced trader who teaches beginning traders revealed that he had recently not only hit the wrong key once but then went ahead and did exactly the same thing again! He was used to hitting the "buy" key, as he usually went long on a stock. But this time he was selling it short, that is selling the stock first, hoping it would go down, and then buying it back if it did. Out of habit, he hit the "buy" key and realized that he was supposed to hit the "sell" key, as he was going short. He had 1000 shares of the stock and it was going down quickly! |
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He again puts in an order for 1000 and again hits the "buy" key and begins to panic. He had to take one hand and hold the other hand and guide it to the "sell" to bail out of both positions, losing $750 in a matter of seconds. This is a good example of how even the most experienced traders can have a mental lapse, where habit kicks in and they make the wrong, costly move. |
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In the trading rooms, initially it can be quite intimidating just to learn how to use the souped-up computer systems they have available. There is a large amount of data flashing at you continuously and multiple open windows filling every corner of your screen. |
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Often, you are trying to monitor more than one screen at a time. So, you may have all the data flashing on one main screen in front of you and off to the side will be a smaller screen tracking the Standard & Poor's (S&P) futures index. Closely monitoring the futures is common practice by day traders and a good idea, since it gives you a slight jump on which way the stock market is headed. |
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Of course, it doesn't really give you a jump on other traders, because they are doing the same thing. There is a direct positive correlation between the direction of the futures index and the broader market. This is why some say, if you are a day or minute trader, never buy a stock unless the futures index is moving up. It is also why one of the first things they teach you at a trading firm is to always keep an eye on the futures index. |
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In any case, the apprehension that goes with having your money on the line, and the need to speedily execute trades, makes it ripe for mistakes to occur. And of course, once the error is made, you have no recourse. If the trade goes through, you have to live with your mistake. Good luck in getting your brokerage firm to make allowances because you pushed the wrong keys! |
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However, it's not impossible for them to be understanding, and here's a personal example of this. (It helps if you have a long-standing account with your brokerage and at least a modest amount on deposit.) |
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