Common Mistakes Traders make

By | June 3, 2014

 

  • Position sizing is too big. New traders tend to trade so big that it engages their emotions to interfere with the trade and creates big losses that destroy their capital.

 

  • They don’t use stop losses. Traders tend to focus so much on entries and being right that they fail to have an exit plan if they are wrong and if they do they tend to not take the initial stop loss level and instead hope for a rebound.

 

  • Not researching who they are versus how their system works. A trader can only trade a system that matches their risk tolerance and market beliefs.

 

  • They like following others into trades. A trader can not copy others because they usually don’t know the time frame of the trade, the position size, or the stop loss level.

 

  • They lack  risk management. With out risk management traders just give back all their profits during their next losing streak or blow up their account with a few big bad trades.

 

  • Using leverage and margin. New Traders seem to only imagine the big potential profits of using leverage in options and futures or margin and not the risk of amplifying a loss.

 

  • Selling too soon for no reason other than to “take profits”. Traders tend to like to take profits fast to lock them in but let losses run and hope they come back to even. They primary way to be a profitable trader is to have big wins and small losses.

 

  • Caring too much about the short term noise. Ignore the noise in your time frame and only focus on the actual signals that really tell you it is time to enter or exit.

 

  • Over trading or revenge trading. Traders tend to think that all activity is good, only the right activity is good. Never trade in anger trying to get back money that you lost. Money only returns to you by following a robust trading system.

2 thoughts on “Common Mistakes Traders make

  1. Nikhil

    These articles r soo useful. Much more beneficial than the stock & nifty analysis which is also bang on. But I haven’t seen n e other blog where soo much emphasis is given on emotional side of trading. Truly appreciate these posts 🙂

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