1. Overtrading – Trading often with tight stops and tiny profit targets will only make the broker rich. The desire to “just” make a few thousand rupees a day by locking in tiny profits whenever possible is a losing strategy.
2. Over leveraged – Leverage is a two way street. The brokers want you to use high leverage because that means more spread income because your position size determines the amount of spread income; the bigger the position the more spread income the broker earns.
3. Relying on Others – Real traders play a lone hand; they make their own decisions and don’t rely on others to make their trading decisions for them; there is no halfway; either trade for yourself or have someone else trade for you.
4. Stop Losses – Putting tight stop losses with retail brokers is a recipe for disaster. When you put on a trade commit to a reasonable stop loss limit that allows your trade a fair chance to develop.
5. No Trading Plan – ‘Make money’ is not a trading plan. A trading plan is a blueprint for trading success; it spells out what you see your edge as being; if you don’t have an edge, you don’t have a plan, and likely you’ll wind up a statistic (part of the 95% of new traders that lose and quit).
6. Trading Against Prevailing Trend – There is a huge difference between buying cheaply on the way down and buying cheaply. What was a low price quickly becomes a high price when you’re trading against the trend.
7. Exiting Trades Poorly – If you put on a trade and it’s not working make sure you exit properly; don’t compound the damage. If you’re in a winning trade, don’t talk yourself out of the position because you’re bored or want to relieve stress; stress is a natural part of trading; get used to it.
8. Being Too Smart – The most successful traders I know are high school graduates. They keep it simple and don’t look beyond the obvious; their results are excellent.
8. Ignore Technical Condition – Determining whether the market is over-extended long or over-extended short is a key determinant of near time price action. Spike moves often occur when the market is all one way.
9. Emotional Trading – When you don’t pre-plan your trades essentially it’s a thought and not an idea; thoughts are emotions and a very poor basis for doing trades. Do people generally say intelligent things when they are upset and emotional? I don’t think so.
10. Lack of Confidence – Confidence only comes from successful trading. If you lose money early in your trading career it’s very difficult to gain true confidence. The trick is don’t go off half-cocked. Learn the business before you trade.
11. Lack of Courage to Take a Loss – There is nothing macho or gutsy about riding a loss, just stupidity and cowardice. It takes guts to accept your loss and wait for tomorrow to try again. Getting married to a bad position ruins lots of traders. The thing to remember is the market does crazy things often, so don’t get married to any one trade. It’s just a trade. One good trade will not make you a trading success; rather it’s monthly and annual performance that defines a good trader.
12. Not Focusing on the Trade at Hand– There is no room for fantasizing in successful trading. Counting up and mentally spending profits you haven’t made yet is mental masturbation and does you no good. Same with worrying about a loss that hasn’t happened yet. Focus on your position and have a reasonable stop loss in place at the time you do the trade. Then be like an astronaut – sit back and enjoy the ride. No sense worrying because you have no real control. The market will do what it wants to do.
13. Too Many Charity Trades – When you make money on a well thought out trade don’t give back half on a whim. Invest your profits from good trades on the next good trade.
14. Courage Under Fire – When a policeman breaks down the door to a drug dealer’s apartment he is scared but he does it anyway. When a fireman climbs onto the roof of a burning building he is scared but does it anyway, and gets the job done. Same with trading. It’s ok to be scared but you have to pull the trigger. No trigger – no trades – no profits – no trader.
15. Rationalizing – Killer. Absolute Killer. Put your trade on and let it run. If it hits your reasonable pre-determined stop, you’re out. Think of yourself as a prizefighter. You just got knocked out. Moving your stop is like getting up after being crushed with a knockout blow. It’s pointless. Things will only get worse. Don’t ignore the obvious. You’re wrong – get out. Come back the next day and try again. A small loss will not hurt you – a catastrophic loss will.
16. Too Much Detail – If your trading more than 2 indicators then you need to clean house. Having many indicators stifles trading and finds reasons not to trade. A setup and a trigger is all you need.
17. Giving Up Too Easy – Your first trade of the day may not be your best but certainly it’s no reason to quit. I have a preset daily trading limit and I use it. You can’t make money by making excuses. Getting trades wrong is natural and should be expected.
18. Jumping the Gun – Don’t be penny wise and dollar foolish. Wait for your trade signal to be clear. Put on your trade and give it a decent size stop loss so that you don’t get knocked out by random noise.
19. Afraid to Take a Loss – trading is not personal, it’s business. Don’t think that a poor trade is a reflection on you. It could be you’re just ahead of your time or a commercial order hits the market and temporarily creates a small unexpected move. Again, place your stop beforehand and NEVER increase your pre-determined risk. If it’s going bad, it will probably get worse. I think that’s Newton’s “body in motion tends to stay in motion…”
20. Rumors – Rumors are rumors almost 100% of the time. Think about where in the motion you heard the rumor.
21. Overconfidence – Trading is simple but not easy. Statistics show 95% failure rate of those attempting to become traders. If you’re doing well, don’t take your success for granted. Always be on the lookout for ways to improve what you are already doing.
22. Getting Pumped Up – The trick is to maintain an even keel. When you are in a trade, you want to think exactly as you would if you didn’t have a trade on. To do this requires a relaxed disposition. This is not a football game. Don’t get psyched up. Relax and try to enjoy it.