10 Deadly Trading Mistakes!
The following are 10 most common but deadly Trading Mistakes, which traders should avoid at all costs. Anyone of them can literally destroy oneís financial dreams and goals!
1. Trading for excitement & thrill Not
Many traders consider stock market as casino and trade for
thrill and fun only. As soon as one has a losing trade, he wants
to quickly make back the lost money. He thinks about the other
things he could have done with the money, regret taking the
trade and want to recover as quickly as possible. This in turn
leads to further mistakes. Be patient and wait for the next high
probability opportunity. Don't rush back in.
2. Trading with a high ego.
Many individuals who have remained highly successful in other
business ventures have failed miserably in trading game. Because
they have a fairly big ego and thought they couldnít fail. Their
egos become their downfall because they can not except that they
would be wrong and refuse to get out of bad trades. Once again,
whoever or wherever has any one come from does not concern the
markets. All the charm, powers of persuasion, number of degrees
& diplomas of business management on the wall or business savvy
will not budge the market when you are wrong.
3. Three 4-letter words that will kill
If you ever find yourself doing one or more of the above while
in a trade then you are in big trouble! Markets has own system
of moving up & down. All the hoping, wishing and praying or
being fearful in the world is not going to turn a losing trade
into a winning one. When you are wrong just use a simple
4-letter word to correct the situation-GET OUT!
4. Trading with money you can't afford
One of the greatest obstacles to successful trading is using
money that you really canít afford to lose. Examples of this
would be money that is supposed to be used in any other
business, money to be paid for college/school fee, trading with
borrowed money etc. Ultimately what happens is that when someone
knows in the back of their mind that they are risking the money
they can not afford to lose, they trade out of fear and emotion
versus logic and no emotion. If you are in this situation It is
highly recommend that you stop trading until you earn enough to
put into an account that you truly can afford to lose without
causing major financial setbacks.
5. No Trading Plan
If you consider yourself a trader, ask yourself these questions:
Do I have a set of rules that tell me what to buy, when to buy
and how much to buy, not just for the next trade, but for the
next 10 trades? Before I enter a trade, do I know when I will
take profits? Do I know when I will get out if I am wrong? These
questions form the first part of a trading strategy. There
simply cannot be any expectation of success if we can't answer
these questions clearly and concisely.
6. Spending profits before you make
Nothing is more exciting then getting into a trade that blasts
off and puts you into a highly profitable situation. This can
cause major problems however, because this type of trade puts
you in a highly euphoric state and leads to daydreaming about
the huge profits still to come. The real problem occurs as you
get caught up in the daydream and expectations. This causes you
to not be prepared to get out as the market reverses and wipes
off all your profits because you have convinced yourself of the
eventual outcome and will deny the reality of the situation. The
simple remedy for this is to know where and how you will take
profits once you enter the trade.
7. Not Cutting Losses or letting
One of the most common mistakes made by traders is that they let
their losses grow too large. Nobody likes to take a loss, but
failing to take a small loss early will often result in being
forced to take a large loss later. A great trader is not someone
who has never had a loss. Great traders have made many losses.
But what makes them great is their ability to recover quickly
from a string of losses.
Every trader needs to develop a method for getting out of losing
trades quickly. Research and learn to apply the best methods for
placing protective stoploss orders.
The only way to recover from many (small) losing trades is to
make sure the winning trades are much larger. After a series of
losing trades, it becomes difficult to hold a winning trade
because we fear that it will also turn into a loss. Let your
profitable trades run. Give them room to move and give them time
8. Not Sticking to your plans &
Changing strategies during market hours
If you find yourself changing your strategy during the day while
the markets are still open, be mindful of the fact that you are
likely to be subject to emotional reactions of fear and greed.
With rare exception, the most prudent thing to do is to plan
your trading strategy before the market opens and then strictly
stick to it during trading hours.
9. Not knowing how to get out of a
Itís amazing that most of the traders donít have any clear
escape plan for getting out of a bad trade. Once again they
hope, pray wish and rationalize their position. It must be kept
in mind that market does not care what you think. It does what
it does and when you are wrong you are wrong! The easiest way to
keep a bad trade from going really bad is to determine before
you get in, where you will get out.
10. Falling in love with a stock (Just
Many traders get fascinated by just a stock or two and look for
opportunities to trade in those stocks only ignoring the other
profitable trading opportunities. It is because they have simply
fallen in love with a stock to trade with. Such tendencies can
be suicidal as for as trading is concerned. It may cost any one
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