Common trader mistakes

These are some point’s I have learned and also heard from experts.

1. Having no plan or edge over the market. You need to have a system that has a positive outlook and it’s repeating.
2. Thinking it’s about the ‘one’ trade. Thinking about one trade is a warning that you are risking too much, because no one trade should risk your existence. And it’s impossible to find systems that are right always. You just need to be right more times than wrong. The result is the outcome of many trades over given period(month/year)
3. Wrong position sizing. Risking too much or too little for individual trade. You should calculate the risk for your account and make positions that don’t risk your existence, but they still need to be big enough to make a positive impact too.
4. Style drift. Beginner traders style drift, they may take a day trade, but after successful start they want to extend it and drift to swing, or take wait for swing for weeks, and then just take profits within the same day. Usually problem is that they don’t have a written system/verified edge and mental issues make them change the style. You can have multiple styles, but decide the style you are using before making the trade and write it down.
5. Not understanding stop loss usage and it’s effect to accuracy. Cutting losses short is very important, but using stop loss makes your accuracy lower. It’s not possible to use very small stop loss, because it’s going to hit always because marked movement. You have to limit big mistakes by selling losers, but if trade is solid, company has not changed and your entry is good. You need to give it room to breath a little bit.
6. Not having daily / weekly stop loss. Most expert traders have these. They limit the death spiral and revenge trading, where trader start to win back the losses in aggressive manner. Usually just generating more losses.
7. Not keeping Records and statistics. To improve your skill, you need to have records. Without these it’s very hard to even verify you have working edge over the marked. And what trades should be eliminated to improve the returns. Google docs spreadsheet is a good way, enter stock name, entry price, exit price, stop loss level of method, profit/loss, used method(important if many systems in use, you need to compare your day traders to your swing trades), reason for entry, reason for exit, and lastly feelings(to understand if the issue was a mental state).
8. After loosing, most people are too fast to take small profits on winners, Good idea is to use rules, in swing trades you can use days(don’t sell before 6 days). Or sell half of the position to satisfy the greed and let the other half room to run, just raise the stop loss slowly. <-common expert trader method.
9. Unrealistic market expectations, market doesn't understand your needs, you are trading against experienced professional traders, and winning consistently is very hard even for experts that work full time. Fighting for profit in that market is very hard. getting away consistently even with small profits is a real skill.
10. Not having written down rules, playbook. You need written down rules that you must obey while trading. This limits the mental issues while under stress. And you need playbook, this is trade methods, with rules, what to look for, how to take it, how to size the position, how to manage possible loss, when to exit if it goes south, or if it wins, and even if it's not going anywhere. And after testing these methods you can fine tune the method, improve it.
11. spending time while trading, you don't need to take trades, you don't have to have positions. If you don't see good trades, don't take any, Most likely you can occasionally win but without real focus you are just standings still and causing commission fees.
12. Following other people trades, This is beginner mistake, find your own setups, and know what makes your edge.
13. Trading unknown instruments, You have to know what you are trading, in most styles you need to know the stock individually, how many times it's generating certain trade in a year, what are ways to find out the position.

Some of these are my own findings and some these are taken from various sources, one of the best resource is 'chat with traders' youtube channel. Check it out!

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10 things what to consider when buying stocks

I have been investing and sometimes even trading for some years, I cannot call my self successful, but I have learned some things and I have issue to even remember those lessons, so I though I write them down.

if you want to buy stocks, any stock, consider always these things. It’s going to keep you out of many losses and out of common pitfalls.

Print it out and consider these steps every time before you buy any financial instrument.

1. Is this a game / play, Are you after a quick buck?( I recommend not to do it)

2. Is this a good company? (don’t buy bad companies), who uses the products, would you buy their product, do you see people around you using their products? is future trend or technological progress good for this company or bad?

3. What do you know about this company?

4. what is the dividend yield? (could you keep the stock for ever just for the dividend).

5. Are you at the top of your game? stress situation? have you followed the market recently? How mentally fit are you ? How much do you know about stocks?

6. is the market and/or the stock in a Uptrend or downtrend? what is the direction of the long time trend and is this trade against it or with the trend. (avoid against the trend trades).

7. What stop loss level would you use? When do you cut your losses?

8. When do you sell it? what is the target? or do you keep it for ever for the dividend?

9. Is this day a good day to buy it? are we up or down for the week, is this week a down or up week. Are we at the top of the channel or at the bottom(every stock has a channel where it travels). Buy at the bottom half of the channel, it’s easier to set stop loss, and set the stop loss below the channel. if you set it in the channel, you are going to be shaken out.

10. Is this money free for this use? can it stay in the stock for a long time? How big position is it safe to take compared to the total account size, so even if this company would fail, you would still live with it.

That’s the most important part.

Follow up instructions:

When you are in the trade remember to follow it, set the stop loss straight after you have bought the stock. Don’t change the stop loss. Don’t even raise it too fast.

Log in to google alerts and Make a alert for this stock, so you get mail every day or every week what’s going on with the company.

if the company has any hint or rumor about financial mess or counting practice errors, sell it immediately.

Account handling quide:

1. Don’t ever use too much of position to one company, it could fail.

2. Use stop loss when ever feasible, it’s mentally easier.

3. Save more money to the account always. What ever happens, just add money every month. And try not to loose more then you can save, if you loose, wait that the saving repairs the hole. Don’t accelerate trading after losses, stop the trading to cope.

JP

I can modify this if I remember something else.