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Trading Mistakes and Bad Habits to Avoid

I was recently asked about some of the trading mistakes new traders fall into when starting out.

It was easy to come up with a lengthy list, mainly because I’ve personally made all of these mistakes myself, and in most cases, more than once.

I thought it would be fun to put together a bulleted list of some high-level trading mistakes and bad habits to avoid.

In no particular order, and by no means a complete list:

Trading Mistakes and Bad Habits to Avoid

  • Trading with too little capital (relative to costs of commissions).
  • Overtrading when there is nothing to do (again, damn commissions).
  • Averaging into losing trades when it’s not a part of your original plan.
  • Entering into a trade without an exit plan in mind.
  • Entering into a trade risking more than 1 to 2% of your total capital.
  • Entering into a trade based solely on someone’s tweet.
  • Trading without understanding what edge you actually have.
  • Trading to get back gains (revenge trading).
  • Thinking trading is easy after going on a  winning streak.
  • Thinking the market is out to get you after getting stopped out.
  • Mistaking luck for real skill or edge (very difficult to identify).
  • Blaming anyone but yourself for your losses or performance.
  • Letting outside media or opinions influence your trading strategy.
  • Thinking just because you “are a trader” that you need to trade.

What’s particularly dangerous about this list, and why bad habits is a key phrase, is because doing anyone of these can reward you with a positive short-term outcome.

For example, averaging into a losing trade without it being a part of your original strategy can successfully bail you out of an underwater position.

But over the long run, that behavior is all too likely to come back to rear its ugly head and cause havoc on your account.

The same holds true for many others on this list.

Hopefully this serves as a good reminder to keep up with your sound trading principles, and if you do find yourself routinely doing anything from above, make sure it is something you have a deliberate and rational reason for.

Anything else you want to add? Leave a comment below.

Thanks for reading and good luck out there.

5 comments on “Trading Mistakes and Bad Habits to Avoid

  1. So true! Emotional side of trading is the HARDEST part to overcome. Took me many months and a LOT of lost capital to sort all those points out.

  2. Um, where do I start??

    • Never set stop losses because you expect the stock to climb.
    • Every stock has its own personality. You better study the charts and take a glance at the fundamentals/ news before jumping in.
    • Does the stock have enough volume to sustain your trade? Don’t buy 50k share when others are buying 10k
    • For every up there is a down. When a stock pops, it’s coming down hard and fast
    • Patience is a virtue. Take a long deep breathe and Wait for the pattern to play out. You’ll be glad you did!
    • Never buy within the 1st 30 minutes. There are exceptions.
    • Just when you think no one wants to buy. someone does. Conversely, just when you don’t think someone will sell, someone does. The stock market is nothing but a game of supply and demand.
    • Find stocks where there is strong demand. Obvious, but stocks move in cycles. What part of the cycle are you looking at (buy or sell)??
    • Bail before the earnings reports are posted. Any news is just an excuse for other to sell

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