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Trading Errors

 Ignoring the downside of a trade. Most traders, when entering a trade, look only at the money they think they will make by taking the trade. They rarely consider that the trade may go against them and that they could lose. The reality is that whenever someone buys a futures contract, someone else is selling that same futures contract. The buyer is convinced that the market will go up. The seller is convinced that the market has finished going up. If you look at your trades that way, you will become a more conservative and realistic trader.

Taking too much risk. With all the warnings about risk contained in the forms with which you open your account, and with all the required warnings in books, magazines, and many other forms of literature you receive as a trader, why is it so hard to believe that trading carries with it a tremendous amount of risk? It’s as though you know on an intellectual basis that trading futures is risky, but you don’t really take it to heart and live it until you find yourself caught up in the sheer terror of a major losing trade. Greed drives traders to accept too much risk. They get into too many trades. They put their stop too far away. They trade with too little capital. We’re not advising you to avoid trading futures. What we’re saying is that you should embark on a sound, disciplined trading plan based on knowledge of the futures markets in which you trade, coupled with good common sense.

Great Nuggets from the Book-A Better Way to Make Money.

1.  The secret to losing money in the market is to know why.  “The losers “were ‘playing the market’, not using it intelligently.  The fellow at the other end of the deal, who was using it intelligently, not ‘playing the market’, is the one who got the money.”

2.  “It is an undeniable fact that indiscriminate trading in a hectic market will send one to financial oblivion quicker than any other known process.”

3.  “The most careful preparation-a systematic plan-is one of the essentials of success.”

4.  “Market action is not complex but surprisingly simple.  Yet it is often made to appear complex by newspaper forecasters and market letter writers.”

5.  “Market action is human nature in action.”

6.  All market movements are based on “two deep-seated and entirely natural emotions:  the desire for gain and the fear of loss.”

7.  “So anxious are people to find some talisman, some magic wand, that will help them secure the hidden riches of the market, that they will try anything from coin-flipping to crystal gazing to secure the desired assistance.”

8.  “What marvelous results could be attained in the business of making money if those who buy stocks would take a little time to learn a few simple facts about the market in which they are blindly reposing their faith.”

9.  “Market students are continually diverted from making true evaluations of securities and commodities because they study the statistics made by prices instead of the psychology of prices.”

10.  “Adopt one system of trading and stick to it, just as you employ and stick to one physician in whom you learn to have confidence.”

11.  “One of the most important points in your market education is to learn as early as possible that the customary and supposedly weighty market news is of very small importance.  The news only looks important.”

12.  “Don’t trade just because you can afford to lose.”

13. “Practice makes perfect is an old copybook adage that works well in the market place.”

14.  “If a trade fails to come out right, the error will be found in the operator-not the market.”

15.  “Trading is simple another form of business.  Treat it as such.”

16.  “Trend to the investor is like the vein of gold to the miner, who must follow the vein faithfully if he expects to get the yellow metal.”

17.  “Stocks are made to buy and sell…not to be bought and held.”

18.  No matter what a thing costs, stocks or otherwise, “it is worth only what you can somebody to pay for it.”

19.  People will always be prone to be extravagantly optimistic or dolefully in the slumps and “in this action is unlimited wealth for the men who realize this fact and will use it with confidence and decision.”

20.  “Success is the most desirable thing in the world, but it is an eliminating contest.  It may trample the thoughtless trader into the dust, but it will pour large treasure into the laps of those who work in sincere harmony with its laws.”

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