Reblog: 12 Dumb Things New Traders Do
There are some common mistakes that the majority of traders make as they dive into trading before they have really studied what does and does not work. All new traders will find many of these things familiar. Some of us had to fight our natural impulses hard to overcome these bad habits.
A Dozen Dumb Things that New Traders Do
- Being a stubborn bear in a bull market. Continuing to sell short inside a strong uptrend not only causes the loss of money as a market makes higher highs but you miss out on the easy profits made buy simply holding positions or buying the dips.
- Being a stubborn bull in a bear market. Some markets are under distribution and keep making lower lows. If a market is not in an established uptrend or trading range then it can go lower if support does not hold. A stop loss gets you out of a downtrend.
- Risking your entire trading account on one trade. You should never risk your whole trading account and trading career on one trade. Safety comes in trading a small size so every trade is just one of the next one hundred trades not your whole future on the line. This is a poor choice financially and emotionally. It is also a sign of arrogance believing you can predict a non-existent future.
- Trading an account that is so small that you can’t even overcome commission costs. If you begin trading with an under capitalized account the odds of success are tiny. You have to have enough capital to manage risk with different positions and commission costs should be such a small percent of your trading capital that they do not even matter.
- Trading your opinions instead of the chart action. The market does not care about your opinion. The successful traders that I have studied used proven systematic processes to trade not subjective opinions.
- Think that some trading guru has a crystal ball and follow with complete faith in their market calls. No one knows what the market will do next. You need to be following actual price trends to make profits not rely on predictions from prophets.
- Keep doing the same type of bad losing trades over and over and expecting profitable results. All trades must be made inside a quantified system that has been historical back tested for profitability.
- Trading randomly instead of systematically. A trade made outside a defined system is just random in nature. All trades should occur with signals that can be repeated.
- Trading with no edge. If you do not know what your edge is that will make you profitable you should not be trading.
- Think that trading is easy money. Trading is the hardest easy money you will ever make. The hard work happens before the actual trading.
- Let their emotions move strongly based on a single trade. You have to trade like a professional business person not an emotional gambler.
- Judge their ability to be a successful trader in just one market environment. You must have a strategy to lock in bull market profits and trading signals for all types of market environments.
The original post is written by Steve of Newtraderu.com and appears here.