Trading Mistakes traders should avoid

By | February 11, 2015 4:11 pm
11 Comments
  • Never, NEVER cancel a stop loss. I know, I know, every time you have a stop loss in the market, the market moves just enough to stop you out, right? Well it might mean that you should evaluate where you place your stops (this is where good trading journals come in handy), but once you’ve done your analysis and placed the trade, you need to be committed to the trade and your plan. The only adjusting you should do is to lock in your profits.

 

  • Always have your broker or your trading desk number handy, even if you trade electronically. This is really important for the day trader who is trading leveraged markets. It is easy to get a little too comfortable when your trading platform and internet connection are running smoothly, but once you drop your guard that inevitable lost connection will happen…a lost minute, even seconds could be an expensive lesson!
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  • Always check your open orders. This can be done a few different ways depending on your trading platform, but if your intention is to be flat in the market, always double check!

 

  • Don’t rely on Dollar Cost Averaging to “repair” a bad trade. It does NOT work. Trust me! I know you’ve heard stories about making money by adding to a losing position, but let me share one word…ENRON.

 

  • The market will always go higher and it will always go lower. Don’t try to pick tops and bottoms on a hunch. This is where most new traders get burned.

 

 

  • Don’t over-leverage yourself or have all of your money tied into one position. Keeping cash on hand is okay as a trader. These days brokers are offering extremely competitive margin requirements for day trading futures, but low margins can be a wolf in sheep’s clothing.

 

  • Don’t trade to trade. Understand that there are 3 positions you can take as a trader: a long position, a short position and a position to NOT be in a position. There will be plenty of trading opportunities that will come along. Don’t give money to the markets simply because you are bored!

 

  • Avoid trading a strategy without having a good understanding of how the strategy works. What is the typical winning percentage? What is the largest drawdown? In general, high winning percentage strategies have smaller average profits per trade. Lower winning percentage strategies might not have as many winners, but when you are a winner, you typically win big. If you expect your strategy to bring big profits without losses, you can also expect a check made out to “REALITY” to come your way any day.

 

  • Don’t get cocky after a few wins. The market WILL humble you and make fools out of those with egos.

11 thoughts on “Trading Mistakes traders should avoid”

  1. Rajiv

    Trading FnO is like fighting against yourself only. The biggest opponent in this is yourself only .Reason is that since our childhood, we are taught to have faith in our decision and fight to the end to prove our point. But here in trading you should be ready to change your decision next second should the trade move in reverse direction.Here is the catch.Most of the ordinary mortals get totally stumped out by the sudden change in the direction, unable to adapt themselves to the new reality . Acceptance of the mistake and riding on the new trend is the total crux of the FNO trade.Are you made out for this. Just ponder over…..

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    1. Bramesh Post author

      Thanks All for your precious comments.

      Its very helpful for me and all blog readers.

      Rgds,
      Bramesh

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  3. Noble

    Thanks for this great article.
    Adding few points…
    Traders are aware of all these possible errors beforehand.But we make the same mistakes again and again.
    We need to become objective observers of our own thoughts and actions while trading and understand why we make these mistakes. Coaching and reading books will not be helpful beyond a point.
    Real experience in trading is necessary and the real work is on ourselves to become consistent and profitable.

    One of the significant learning in my trading career was when i fully understood that trading is a very tough job and you are fighting against the best of the brains in industry esp people who are trying to take your money.

    We have to learn everyday the new patterns in the market to gain an edge.There is a continuous learning involved. We have to learn to flow with market.This is possible only when we let go our ego and becomes students of market forever.

    Happy trading 🙂

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  4. prakash tanak

    Once again you have blatantly said the TRUTH.

    Sir, please advise on the Stop Loss when you use the Camarilla.

    The prescribed SL formula of one level above/below the entry level seems to be too liberal. Also the risk reward ratio doesn’t work in this technique. What is your opinion?

    Regards.

    CA.Prakash Tanak

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  5. T.Srinivas

    It is said ” Don’t give Rs.10/ to someone who asks, but show him the way to earn Rs.10/ ” Greater sevice than this is to give someone courage ! You are doing both ! The last line about Egos-People with bloated egos should be made to trade for a day. Really! Thank -you , Sir.

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  6. Bhaskar

    That’s a neat piece of advice, I have come across all the things that you have mentioned as mistakes in this post. Making Mistakes = Lesson Learnt. 🙂

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  7. kindergardentrader

    Great piece. Very naked truth. Though much material is available on where to place a stop loss, hope you will write about the technique some time.
    Thank you so much. I always marvel at your appetite to study and talk markets – you must be breathing it.

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