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9 OF THE MOST EXPENSIVE MISTAKES IN
TRADING & HOW TO AVOID THEM
Trading is dif cult, yet rewarding. But it isn't always about
what you do right - what you don't do wrong matters too.
Learn 9 of the key mistakes many traders make, and how
to try to reduce or eliminate them.

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9 OF THE MOST EXPENSIVE MISTAKES IN

TRADING & HOW TO AVOID THEM
 Feb 27, 2018 /  admin

Past performance has no bearing on future results.

For informational purposes only, not a recommendation to buy or sell
any securities. Please see our Disclaimer 
(https://trendtradingsignals.com/about/disclaimer).

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26/10/2019 9 of the Most Expensive Mistakes in Trading & How to Avoid Them :: Trend Trading Signals

One of my favorite principles in trading also applies to life as well -

it isn't always what you do right, it's what you don't do wrong that
matters.

Trading is a very dif cult endeavor, and also one of the most
rewarding in the world. When one excels at trading, they can set
their own hours, work for themselves anywhere in the world, and
do something that they love. Most great traders are passionate
about the art and science of successful trading. They have to be to
endure the countess failures and dif cult lessons along the way and
keep moving forward. Part of my developmental process has always
been to analyze my trade history and look for ways to improve it. I
learned long ago if I could simply avoid making the same costly
mistakes over and over again, I would stand a chance of being
successful.

Below are what I believe are 9 key mistakes that traders make, from
own personal observations and experience, from 21 years of
trading, and how to try to reduce or eliminate them. Keep in mind
that my perspective is based on my intermediate to longer term
time frame. 

I will start by saying that my belief is that good trading does not
require bold predictions or market calls. My belief and personal
experience is that a sound technically based, price based process,
with excellent risk management and money management skills used
consistently and with discipline can produce consistent pro ts over
time.

1. Operating Without a Trading Plan

One reason the failure rate in trading is so high is because traders

lose enough money that they can not continue to trade, or just give
up. Markets don't beat traders, traders beat themselves. The
markets have no idea that any of us exist, they simply go where they

go. How a trader positions their money, and what their actions are,

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is what produces wins and losses over time. Top tier traders treat
their trading like a business and develop a written operating plan
which identi es process and risk controls. The trading plan is the
gameplan of which day to day operations are executed off of.
Having a plan helps put into place good processes and systems to
help develop consistency and reduce emotional trading.

2. Emotional Trading

Possibly the single most damaging thing a trader can do to their

accounts is emotional trading. Fear and Greed are the two most
detrimental and costly emotions in trading. The seven mistakes
below key off of fear and greed. Greed and Fear of missing out often
causes traders to take on excessive risk, trade too aggressively or
chase positions. Fear of small calculated losses often causes traders
to cut good trades early before the stop loss is hit, or to not take a
correctly signaled trade at all due to fear of having a losing trade.  

3. Not Using Stop Losses

The other side of the bigger winners vs smaller losers equation is to

keep the inevitable losers small and manageable. Preserving capital
is a hallmark of excellent traders. Many traders personalize their
trading and have a very dif cult time taking a loss in a position as if
it is some kind of a personal affront. My view going in is that I accept
that every single trade that I take can be a loser and I pre-determine
how much risk and loss I am prepared to take going in. I set a hard
stop loss in the market and if it gets hit, it gets hit. I don't worry
about stop runs because I use a volatility based stop loss system
based on ATR , Average True Rage, and set the stops far enough
away that shorter term intra-day chop should not trigger tem. I also
trade very liquid large cap and mega cap stocks and ETFs.

4. Adding to Losing Trades

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Even more nancially damaging over time than holding losing

trades for too long is to add more money to them on the way down,
either to lower the average cost or in hopes of breaking even
sooner. When a position moves against you, the market is telling
you that it may be wrong. Putting more money into a losing trade is
one key thing that great traders caution against and for good
reason. Literally one bad, large trade can set a trader back
permanently.

5. Selling Winners Too Early

Novice traders tend to focus only on the perceived reward and not
on risk. Experienced professionals focus on the risk as well as the
reward.  Novice traders think see every time they hit the buy button
as a chance to make money. Pros realize that every time they hit the
Buy button is also a chance they can lose money. Some of the best
traders in history, George Soros, Stanley Druckenmiller, Paul Tudor
Jones and Bruce Kovner, (all Billionaires), amongst others have said
the key to successful trading is excellent risk control and to have
winners that are much larger in size than losers. The best way that I
know of to produce large winners is to hold winners for longer time
frames. Selling winners too early is often cited as one of the most
common and costly mistakes that traders make. Some pros have
said that the bulk of their gains over time have come from 15 - 25 %
of their total trades. I think everyone either has told or has heard
the story of buying a stock at $25 or so, selling it at $30 and then
watching it go to $200. Top pros stay in their winning trades as long
as they keep working.

6. Using Too Many Methods

There are literally dozens of ways to make money in markets, long

term , short term technical trading, fundamental trading, etc. The
best traders nd one method/time frame that works for them and
they focus on mastering that method and time frame. One only
needs to excel at one method to be very pro table. Novice traders
try to do too much in markets and "do it all" because they think

being a trader means they always have to be trading. It is much
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better to be world class at one method than to dilute efforts and

time and be below average at many.  Try to nd one method that
works for your time frame and personality, and work tirelessly to
master that method. 

7. Too Much Time Looking at Screeners &

Scanners 

There are over 7,000 securities available to trade in the U.S.

markets, plus derivatives on top of that. Based on portfolio size, 5 to
20 positions can usually generate exceptional pro ts if managed
correctly. There is no need to "be in everything" or even try to be.  I
strive to trade my best technical programs and nd the strongest
stocks and ETFs that meet my criteria.  I keep a narrow daily watch
list of 20 to 30 large cap and mega cap stocks, institutional leaders,
and 15 to 20 core ETFs.  By keeping my focus very narrow, I can
patiently wait for the correct entry signals and not constantly
scannoing through 1,000s  of random "new ideas" every day. Some
traders spend an hour or hours a day looking at charts, screeners,
scanners, indicators, research reports and other data to try to nd
the "next big winner". By daily monitoring and tracking  prospective
positions often for weeks, it allows me to let the trade come to me
and not feel the need to "chase it".     

8. Listening to Media and Outside Opinions

Billionaire trader Paul Tudor Jones said it best, "markets go where

they go". He made billions off that concept, as did Billionaire trader
John W. Henry, who owns many sports franchises including the
Boston Red Sox,and said "No one can consistently predict anything,
especially investors. Prices, not investors, predict the future" The
best traders trade price and are open minded to various outcomes.
The media, pundits, and even Wall Street rms can all have views
that may sound intelligent, but for every prediction or intelligent
sounding market call, there is always someone with more money,
more data and more information on the opposite side of their

view/trade. It is going to take time to develop your own process.

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There are many good books, video and websites on line as well as
professional trading educational services and websites that can
teach the basics of developing a sound process. It is better to learn
how to and to follow a proven process than to try to rely on the
media, or third party information to manage your own money.  

9. Trading Too Big

Billionaire trader Bruce Kovner has said novice traders need to

focus on risk management and under trade. This can mean having
too many positions, having too much money in certain positions,
having too much money in the markets, using margin, having too
many correlated trades and/or any combination of these. Novice
traders try to get rich overnight, but the stats overwhelmingly show
they have  better chance of going broke overnight. Some quote
billionaire Trader Stanley Druckenmiller , my personal favorite well
known trader, who has said something to the effect of going for the
jugular and "loading up"  in a trade. Here is the reality of it. You are
not Stanley Druckenmiller. Neither am I. He has one in a million,
literally, talent and experience levels. The statistical chances that
most will never be a Billionaire from trading. The industry odds also
state that over 80% of traders lose money over time. If you can
learn how to become consistently pro table on an annual basis,
that is an accomplishment. If you can learn to generate double digit
returns, that is a great achievement. Making money over time start
by not losing money over time. Big risks result in big losses,
sometimes career ending losses.

Learn how to avoid repeating these 9 costly mistakes, learn how

to not beat yourself, and you stand a very good chance to join the
ranks of consistently pro table traders.  

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