Archives of “big mistake” tag

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Four Main Reasons Why Traders Fail

  
  Education
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# They do not understand that the markets are a mirror of life on a chart. Markets are a living thing and reflect crowd behaviour, you , the trader are one of the crowd too.

# They fail to understand their own personality and what that means for their trading style. It can make THE difference between success and failure as a trader.

# They fail to notice how they transfer their feelings and emotions to their trading and believe that the emotions they pick up from other traders and the markets are theirs.  Feelings are unpopular with traders, big mistake!

# They have unresolved psychological blockages which they supress with superficial positive thinking and learned discipline. We all have blocks, to think that you are the one who has not is dangerous arrogance. 

# And finally….

..add to this one most important point for the beginning trader: Under capitalisation due to unrealistic expectations and poor trader training. The recipe for trading failure is complete.

Lose your money,but keep your discipline.

  
  Education
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Trading is about following a method, system, or rules that give you an advantage over other market participants in the long run. There are good bets and bad bets. There are traders who follow a trading plan with discipline and others that start trading out of fear and greed after strings of losses or wins. Just because you lost money does not mean you made a mistake. Just because you made money does not mean you did not make a mistake. The goal of trading is to make money over the long term not be right every time. Losses are a part of trading. There is a big difference between a loss after following your plan versus a loss after a loss of discipline.

Losses are simply getting out of a trade with less capital than you entered it. The question is was the loss due to your method or your lack of discipline?
A mistake however can be many things, and mistakes can be profitable which is dangerous to the long term health of your trading account.

  1. Trading a position size so big that your risk of ruin is inevitable is a big mistake whether your individual trades are a win or a loss.
  2. Abandoning your method to start trading a different time frame or style than you have researched is a mistake because your edge is gone.
  3. Adding to a losing position is a big mistake because eventually you will be in the trade that does not revert to the mean and you lose your whole account.
  4. Believing that you are above your own trading plan and can start just trading as you wish is a death wish for your account.
  5. Trading based on beliefs instead of reality is a dangerous place to trade and is a mistake.
  6. Taking your entries a little sooner than they are triggered or an exit a little later than your stop loss is a mistake.
  7. Diversifying traded markets or stocks before doing the proper research is a mistake.
  8. Trading so big that your emotions interfere with your trading plan is a mistake.
  9. Trading when you are very sick or going through emotional personal problems is a mistake.
  10. Making trading decisions based solely on ego, fear, or greed is always a mistake whether you win or lose.

Justification Mode

  
  Education
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“The ego is not your friend as a trader. The ego wants to be right, it wants to predict, and it wants to know secrets. The ego makes it much more difficult to trade well by avoiding the cognitive biases that hinder profits.” – Curtis M. Faith

 That quote came to mind this morning when having a conversation with a fellow trader who I think is in what I call “justification mode.”

Justification mode is when traders (or investors) find themselves having to justify poor performance on something that seems logical and which helps comfort and protect their ego without having to own up and face a big mistake.

In this trader’s case, like a lot of people it seems he went and stayed short when the market rolled over last month. Although he won’t admit it to you now, I know from our prior emails he was sucked in by the infamous “death cross” and, in spite of a strong reversal, has now refused to reverse his short (and losing) positions. In fact, his ego is so involved with this short-trade that he’s recently doubled down when the market refused to roll over even using lots of leverage to prove his point. Now he’s in a painful position of being trapped between owning up to the mistake and taking the painful loss or doing what so many tend to do – find a way simply to justify his actions and let a growing loss have the potential to wipe him out entirely.

In our conversation this morning, this trader kept talking about “the market is in a trading range” and “ready to roll over.” That’s fine and well as long as the price action confirms that view, but it hasn’t yet. As I asked him this morning, “Can you afford simply to stay wrong just to protect your ego?” He didn’t know how to respond. In fact, it became clear that he didn’t even realize that his ego was becoming such a strong influence over his entire market analysis. I suspect, as he does as well now after talking to me, that if this trader’s positions were different, for example aggressively long the market instead of short, this same trader would not be seeing a “trading range” or a market “ripe for reversal.” Instead, he would see nothing but more upside potential. This is why human traders, with human egos, are often at a significant disadvantage.

Trust me, at one point or the other, we’ve all done this. I know I have been in justification mode many times even when I didn’t even realize it until much later on. However, over time, I’ve learned to spot to tell tale signs that I’ve fallen trap to this and then have learned to take immediate corrective steps to right the ship. Moreover, as many of you also know, at all times I also trade in a way that makes sure that when I do make mistakes (which are often) that they NEVER have the potential to wipe me out. When your ego gets so involved in your trading, the potential for catastrophic losses are tremendous which is why we’ve all have to learn and know when we’ve fallen into justification mode. (more…)

Pepsi To Cease Advertising

  
Analysis, Economy, Education, Uncategorized
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‘We Know It’s Good, And That’s Enough’ Says CEO
Pepsi-To-R_article
PURCHASE, NY—PepsiCo sent shockwaves through the carbonated beverage industry Monday when the multibillion dollar corporation announced that it would cease all advertising of its popular soda product, effective immediately.

“We know it’s good, and everyone’s pretty happy with the overall taste, so why spend all our time worrying about what other people think?” PepsiCo CEO Indra K. Nooyi told reporters during a press conference at the company’s corporate headquarters. “Frankly, it just feels sort of weird and desperate to put all this energy into telling people what to drink. If they don’t like it, then they don’t like it.”

Added Nooyi, “That’s not really any of our business anyway.”

According to Nooyi, top PepsiCo brass held a series of meetings over the past several months before unanimously agreeing Monday that they all enjoyed Pepsi, and that the company’s century-old history of massive, high-budget ad campaigns, cross-promotional tie-ins, merchandising, and Super Bowl halftime extravaganzas had been “a big mistake.” (more…)

Two Mistakes frequently made by Stock Traders

  
  Education
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The first big mistake is the flawed logic of extrapolation. Many traders and investors assume that a trend will remain in force until an “event” comes along to change it. But market trends are not like billiard balls on a pool table. This false assumption will put you on the wrong side of the market more times than not, especially at major turning points.

The second big mistake is to suppose that news events drive market trends. In fact, the opposite is true: economic, political and social events lag market trends.

Behavior Modification

  
  Education
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Behaviour ModificationThe big mistake made by traders is thinking and expecting trading to be a favorable game. Trends both short- and long-term do exist but not 100% of the time.

The correct way to control positions is to only hold them once they prove to be correct. Let the market tell you your position is proven correct, but never let the market tell you that your position is wrong. You, as a good trader, must always be in command of knowing and telling yourself when your position is bad.

Your exposure and risk is much higher if you let the market prove you wrong instead of your actions removing positions systematically unless or until the market proves your position correct. You decide what is correct according to your plan.

You never want to be in a position that is never proven correct. By making the market prove you correct in order to hold a position is acknowledging that trading is a losers’ game and not a winners’ game.

What makes this strategy more comfortable is that you must take action without exception if the market does not prove the position correct. Most traders do it the opposite by doing nothing unless they get stopped out, and then it isn’t their decision to get out at all — it is the market’s decision to get you out. Over time it has proven to be the rule which keeps the losses small and keeps a trader swift and fast to take that loss.

Mistakes

  
  Education
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Another mistake many investors make is that they allow themselves to be influenced by what other people think. I made this mistake myself when I was still learning how to trade. I became friends with a broker and opened an account with him. We played this game called “bust the other guy’s chops when his stock is down.” When I had a losing stock position, 1 was embarrassed to call him to sell the stock because I knew he would he would ride me about it. If a stock I bought was down 5 or 10 percent, and I thought I should get out of it, I found myself hoping it would recover so 1 wouldn’t have to call him to sell it while it was down. Before I knew it, the stock would be down 15 or 20 percent, and the more it fell, the harder it became for me to call. Eventually, I learned that you have to ignore what anybody else thinks.Many people approach investing too casually. They treat investing as a hobby instead of like a business; hobbies cost money. They also don’t take the time to do a post-trade analysis on their trades, eliminating the best teacher: their results. Most people prefer to forget about their failures instead of learning from them, which is a big mistake.

They let their egos get in the way. An investor may put in hours of careful research building a case for a company. He scours the company’s financial reports, checks Value Line, and may even try the company’s products. Then, soon after he buys the stock, his proud pick takes a price dive. He can’t believe it! He makes excuses for the stock’s decline. He calls his broker and searches the Internet, looking for any favorable opinions to justify his position. Meanwhile, he ignores the only opinion that counts: the verdict of the market. The stock keeps sliding, and his loss keeps mounting. Finally, he throws in the towel and feels completely demoralized – all because he didn’t want to admit he had made a mistake in timing.

 

10 Trading Mistakes

  
  Education
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1. Under capitalization – One of the first mistake I made when beginning to trade was being under capitalized. I started with a $10K account without any idea on how to trade. You need enough capital to learn and gain the experience. Some like to call the initial stake “market tuition.” If you can avoid paying your dues, great for you. But most new traders will lose their money. Just make sure you learn from every loss.

2. Having the approach to trading as a “learn as you trade” – Big mistake. “Learn as you trade” = losing money. Losing money can lead to emotional and financial stress and may even create enough fear in you making it hard to trade. Make sure you come prepared to the battlefield. Be a strategist. Sun Tzu said, “The battle is won before it is fought.” Think about it.

3. Trading as a hobby – Take a look at your hobbies. Do they make money? Hobbies in general are entertainment that cost money. Do not approach trading as a hobby. Treat it like a business. Develop a business plan, have goals, and understand what you want out of trading.

4. Thinking that you know it all – The moment one thinks he knows it all is the moment he has become a fool. Its impossible to know everything about the markets. This is a lifetime learning process. Find your niche…. find your speciality and be an expert in it. In other words, find your edge. One thing I learned in trading is that niche = money.

5. Trading without a plan – One of the worst things you can do as a trader is to trade without a plan. Trading without a plan is like driving in a new area without a map or a navigation system. You are lost. (more…)

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