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50 Trading Mistakes

  
  Education
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1. Many futures traders trade without a plan. They do not define specific risk and profit objectives before trading. Even if they establish a plan, they “second guess” it and don’t stick to it, particularly if the trade is a loss. Consequently, they overtrade and use their equity to the limit (are undercapitalized), which puts them in a squeeze and forces them to liquidate positions.

Usually, they liquidate the good trades and keep the bad ones.

2. Many traders don’t realize the news they hear and read has already been discounted by the market.

3. After several profitable trades, many speculators become wild and aggressive. They base their trades on hunches and long shots, rather than sound fundamental and technical reasoning, or put their money into one deal that “can’t fail.”

4. Traders often try to carry too big a position with too little capital, and trade too frequently for the size of the account.

5. Some traders try to “beat the market” by day trading, nervous scalping, and getting greedy.

6. They fail to pre-define risk, add to a losing position, and fail to use stops.

7 .They frequently have a directional bias; for example, always wanting to be long.

8. Lack of experience in the market causes many traders to become emotionally and/or financially committed to one trade, and unwilling or unable to take a loss. They may be unable to admit they have made a mistake, or they look at the market on too short a time frame.

9. They overtrade.

10. Many traders can’t (or don’t) take the small losses. They often stick with a loser until it really hurts, then take the loss. This is an undisciplined approach…a trader needs to develop and stick with a system. (more…)

These are always great

  
Analysis, Education, Life
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Washington Post’s Mensa Invitational which once again asked readers to take any word from the dictionary, alter it by adding, subtracting, or changing one letter, and supply a new definition.
the winners were:

  • Cashtration (n.): The act of buying a house, which renders the subject financially impotent for an indefinite period of time.
  • Intaxication: Euphoria at getting a tax refund, which lasts until you realize it was your money to start with.
  • Reintarnation: Coming back to life as a hillbilly.
  • Bozone (n.): The substance surrounding stupid people that stops bright ideas from penetrating. The bozone layer, unfortunately, shows little sign of breaking down in the near future.
  • Giraffiti: Vandalism spray-painted very, very high.
  • Sarchasm: The gulf between the author of sarcastic wit and the person who doesn’t get it.
  • Inoculatte: To take coffee intravenously when you are running late.
  • Hipatitis: Terminal coolness.
  • Osteopornosis: A degenerate disease. (This one got extra credit.)
  • Karmageddon: It’s when everybody is sending off all these really bad vibes, and then the Earth 
    explodes and it’s a serious bummer.
  • Decafalon (n.): The grueling event of getting through the day consuming only things that are good for you.
  • Glibido: All talk and no action.
  • Dopeler effect: The tendency of stupid ideas to seem smarter when they come at you rapidly.
  • Arachnoleptic fit (n.): The frantic dance performed just after you’ve accidentally walked through a spider web.
  • Beelzebug (n.): Satan in the form of a mosquito, that gets into your bedroom at three in the morning and cannot be cast out.
  • Caterpallor (n.): The color you turn after finding half a worm in the fruit you’re eating

Analysing yourself

  
  Education
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At the end of each trading day (week) you shouldn’t focus solely on your P/L. Instead, focus on your thought process during the day and how well you executed your plan. If you consistently execute your trades according to plan and still lose money, then you need to reevaluate your approach. While there is definitely a cyclical rhythm to the market, no strategy will always work. You need to constantly  and objectively  review what is working and what is not so you can make necessary adjustments to you plan.”

Managing the fear of making a loss

  
  Education
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Managing lossBefore entering a trade I know what type of loss I am happy to accept and I set my stop loss at about that level. Making a loss is part of trading. So long as the losses are small and the wins are large, life is great. Sometimes I have taken several losses in a row, which makes placing that next trade a bit harder because I think about the prior loss. I have overcome this by telling myself that the next trade “is just one of many thousands of trades that I will do in the future” and then I look forward to the next entry.

Cut your losses quickly, let your winning trades run, and allow trades to take their course. Be happy to make small losses, since the next trade may be the big one. Congratulate yourself when you have stuck to your plan, even if you have made a loss.

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