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1. If you can’t stick to the trading plan, you’re doomed
2. You need to create your own rules so you understand them
3. Have no accurate risk and profit objectives before placing a trade
4. Letting losses run and profits turn into smaller profits and losses
5. They make the mistake of closing out their good trades and hold their bad trades
6. Once a trader has a few winning trades he tends to become overconfident and starts guessing his trades, leaving his trading plan and research
7. Placing his winnings on one trade
8. Traders tend to over trade their account size, small account large trade
9. Greed takes many forms, you may be just flicking through markets and suddenly start day trading, trying to scalp the market, having several losses, this was not part of your original trading plan
10. Fail to use stops, adding to a losing position
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11. Fail to use predefined risk %
12. Always trading the same direction
13. New traders, trade emotionally
14. Looking a the market in too short a time frame
15. Unwilling to take a loss
16. Over trading
17. You need to stick with your trading plan, if it states you are required to take a small loss then take the small loss, don’t be undisciplined and let that loss grow until it hurts. Trade the plan
18. If your technical analysis is telling you that the market has turned against you, then exit the market, don’t hold onto fundamental analysis, both have to be right
19. Cardinal rule: "Cut losses short. Let profits run."
20. Plan your trade and trade your plan, use your rational mind not your feelings
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21. Most new traders have trouble with timing their trade and don’t have enough capital to make it through the smaller market retracements. Get your risk % right. Less is more
22. Traders need to understand the difference between small price fluctuation and a fundamental change in the market
23. Not defining your defensive plan before opening a position
24. It is the emotional attachment to a position that will cause you to create large losers. You need to train yourself to keep loss small and practice holding winners for large wins
25. If your under capitalized one reasonable move could wipe you out
26. Too many trades on at once. If you cannot remember all the trades you have in your head, then you have too many
27. Trying to trade inactive markets is dangerous
28. The risk is too large for a small profit, leads to loss
29. Traders lose money because, the loss is not in proportion to account size
30. Lack of discipline also includes results in attachmet – holding on to losers, anger – woulda, coulda, shoulda, ego – trying to beat the market .
31. Large accounts are no guarantee of success
32. Trading against the trend and not using stop loss orders
33. Insufficient capital to trade with
34. Do not over-trade your accounts size, plan your trades risk
35. Inability to ride winning trades, new traders tend to take small profits and miss out on large profits
36 Traders that have no discipline have no plan, they over trade, no patience in waiting for correct set-up for entry and tend be anxious and exit profits to early
37. Traders using their intuition may cause them to hold losing trades, thinking its only temporary
38. Trying to pick tops or bottoms, is a common occurrence and a error
39. No trading plan, no money management, equals emotional trading
Re 4 : Letting .......profits turn into smaller profits and losses
If a trade goes into profit, retraces to a smaller profit or goes negative but the trade is still valid (eg initial stop hasn't yet been hit) why is that a mistake ?
To take your sentence to the extreme you'd be exiting as soon as a trade moved t tick in your favour then had a 1 tick retracement
How is this an error? If a trader wants to buy low and sell high, isn't it his/her job to find these areas?
Perhaps its the simplistic way in which its usually stated, that I object to. IMO, the error is attributable to some other mistake. Some examples:
Failing to read context. In a bull trend, a trader should be looking for the bottom of pullbacks - to enter with-trend. He should be looking for tops to exit. If "picking tops" means entering short, then its a failure to read context. Probably attributable to NTBR or to take revenge for missing out.
Failure to calculate risk/reward. Strategies designed for sideways markets require identifying the top and bottom areas, which are used to set the risk/reward values. If "picking bottoms" means entering long at the middle and stopping out at the bottom, then that's a math, or measurement error.
Failure to become familiar with the anatomy of reversals, which are varied and wide-ranging.
Impatience, because tops and bottoms are often areas.
Lack of confirmation tactics, such as smaller patterns that set up in top/bottom areas.
Obliviousness to higher time frame ranges (where the higher probability tops/bottoms occur).
Lack of breakout strategies. If price is breaking out, what is it breaking out of? a range? a flag? Where is the boundary of that structure? Isn't that boundary a top or bottom? How does the trader set his risk/reward for the breakout without "picking" a value? [/rant]
Trading is a game of probabilities and the key is not to be right or avoid losses and pick tops and bottoms. But to make money over a long series of trades. It does not matter if the next trade is a winner or loser. What matters is taking good trades consistently and practising good money management
You can never think in absolutes when judging price behaviour and be ready to adapt to new market information. For example if price action moves down to a key support area and bounces sharply higher. You then draw the conclusion that the buyers are in control and make the assumption that the market will go higher. You must have the mental agility to change your conclusion if the area is retested and fails to bounce and stays near the key reference area as sellers keep hitting the bid.
I’ve made lots of these mistakes, I start to gamble and trade both directions when the market whip saws, thinking I can scalp off of a seemingly random move in the market. I also get too excited when the market moves in my direction even a little bit, and exit a trade that is fundamentally sound waaaaay to early. I’m going to stick to my well thought out plans and have better control of my emotions from now on. I can almost feel the traders in the market lying in wait whenever I make these common mistakes lol
