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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…)

Day Trading Mistakes

  
  Education
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There are some major day trading mistakes that just about every new trader will make early on in their career.  The ones who survive are those who can recognize these mistakes and take corrective action.

The first mistake many day traders make is to skip the planning phase of the day or a trade.  Every day you sit down in front of your monitors you should have a general plan for the day.  You should understand the major trends and support/resistance of the major indices, and the stocks you plan on trading.  In addition to that, once you see your stock setting up for a trade you should have a plan that includes an entry, a target and a stop-loss before you even pull the trigger on the trade.

Another mistake that we often see in day trading is the inability to exit on a losing trade.  If you have issues with getting out of the market when your pre-planned loss has been hit on your own, try using stop-loss orders.  Never. Never ever ever move a stop loss order once it’s been placed.  This requires some discipline but it will save you tons of money in the long run.  You should never be hoping that your stock will turn around, and go where you expected.  You should be executing your plan to the letter.

On a similar note, you also never want to move your targets.  If you keep moving your target away from the stock’s current price, you’re never going to take your profits.  A typical day trading exit strategy is to take profits at predetermined levels as you proceed into green territory.  This means that before you’ve entered the trade you’ve chosen two or more targets.  You exit a portion of your trade at each target.  Now, if you think your stock is going to trend for the day, you can plan for that too.  This is called a trade-to-hold.  It doesn’t mean you move your target, but rather you try to stay in the trend by setting a trailing stop.  A trailing stop can either be automatically set at a certain percentage or point value behind the stock price, or you can mechanically keep moving your stop loss up to obvious points of resistance or support behind your trending stock. (more…)

Truth

  
  Education
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“Truth kills those that run from it “-Persian proverb

Traders must be able to face the truth.Great traders have learned these lessons early in their careers.Roy Longstreet in his classic book view points of a Commodity Trader started that “the first mistake teaches -then second mistake kills !”

Facing the truth in trading is necessary to prevant the consequences.Truth is necessary at all levels of trading.It is just as important to the novice as it is to the  seasoned veteran.The main difference lies in the ability to face the truth.

Truth seems so somple !But the psyche can do amazing tricks through rationalization.Some of these tricks seen to have no other purpose  then to prevent you from seeing the reality of the truth.The Bible states -“The truth shall set you free “Every religion has a saying echoing the same theme.Overcoming not facing  the truth can be accomplished by writing down the pros and cons of telling the truth.Once it is committed to paper the decision should become self-evident.

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