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FINANCIAL CHRONICLE™ » EXPERT CHRONICLE™ » 10 Deadly Trading Mistakes!

10 Deadly Trading Mistakes!

Go down  Message [Page 1 of 1]

sriranga

sriranga
Co-Admin
10 Deadly Trading Mistakes!  Maxres12

The following are 10 most common but deadly Trading Mistakes, which traders should avoid at all costs. Anyone of them can literally destroy one’s financial dreams and goals!

1. Trading for excitement & thrill Not for profits.
Many traders consider stock market as casino and trade for thrill and fun only. As soon as one has a losing trade, he wants to quickly make back the lost money. He thinks about the other things he could have done with the money, regret taking the trade and want to recover as quickly as possible. This in turn leads to further mistakes. Be patient and wait for the next high probability opportunity. Don't rush back in.


2. Trading with a high ego.
Many individuals who have remained highly successful in other business ventures have failed miserably in trading game. Because they have a fairly big ego and thought they couldn’t fail. Their egos become their downfall because they can not except that they would be wrong and refuse to get out of bad trades. Once again, whoever or wherever has any one come from does not concern the markets. All the charm, powers of persuasion, number of degrees & diplomas of business management on the wall or business savvy will not budge the market when you are wrong.


3. Three 4-letter words that will kill you! HOPE--WISH--FEAR--PRAY
If you ever find yourself doing one or more of the above while in a trade then you are in big trouble! Markets has own system of moving up & down. All the hoping, wishing and praying or being fearful in the world is not going to turn a losing trade into a winning one. When you are wrong just use a simple 4-letter word to correct the situation-GET OUT!


4. Trading with money you can't afford to lose.
One of the greatest obstacles to successful trading is using money that you really can’t afford to lose. Examples of this would be money that is supposed to be used in any other business, money to be paid for college/school fee, trading with borrowed money etc. Ultimately what happens is that when someone knows in the back of their mind that they are risking the money they can not afford to lose, they trade out of fear and emotion versus logic and no emotion. If you are in this situation It is highly recommend that you stop trading until you earn enough to put into an account that you truly can afford to lose without causing major financial setbacks.


5. No Trading Plan
If you consider yourself a trader, ask yourself these questions: Do I have a set of rules that tell me what to buy, when to buy and how much to buy, not just for the next trade, but for the next 10 trades? Before I enter a trade, do I know when I will take profits? Do I know when I will get out if I am wrong? These questions form the first part of a trading strategy. There simply cannot be any expectation of success if we can't answer these questions clearly and concisely.


6. Spending profits before you make them.
Nothing is more exciting than getting into a trade that blasts off and puts you into a highly profitable situation. This can cause major problems however, because this type of trade puts you in a highly euphoric state and leads to daydreaming about the huge profits still to come. The real problem occurs as you get caught up in the daydream and expectations. This causes you to not be prepared to get out as the market reverses and wipes off all your profits because you have convinced yourself of the eventual outcome and will deny the reality of the situation. The simple remedy for this is to know where and how you will take profits once you enter the trade.


7. Not Cutting Losses or letting Profits run
One of the most common mistakes made by traders is that they let their losses grow too large. Nobody likes to take a loss, but failing to take a small loss early will often result in being forced to take a large loss later. A great trader is not someone who has never had a loss. Great traders have made many losses. But what makes them great is their ability to recover quickly from a string of losses.
Every trader needs to develop a method for getting out of losing trades quickly. Research and learn to apply the best methods for placing protective stoploss orders.
The only way to recover from many (small) losing trades is to make sure the winning trades are much larger. After a series of losing trades, it becomes difficult to hold a winning trade because we fear that it will also turn into a loss. Let your profitable trades run. Give them room to move and give them time to move.


8. Not Sticking to your plans & Changing strategies during market hours
If you find yourself changing your strategy during the day while the markets are still open, be mindful of the fact that you are likely to be subject to emotional reactions of fear and greed. With rare exception, the most prudent thing to do is to plan your trading strategy before the market opens and then strictly stick to it during trading hours.


9. Not knowing how to get out of a losing trade.
It’s amazing that most of the traders don’t have any clear escape plan for getting out of a bad trade. Once again they hope, pray wish and rationalize their position. It must be kept in mind that market does not care what you think. It does what it does and when you are wrong you are wrong! The easiest way to keep a bad trade from going really bad is to determine before you get in, where you will get out.


10. Falling in love with a stock (Just Flirt).
Many traders get fascinated by just a stock or two and look for opportunities to trade in those stocks only ignoring the other profitable trading opportunities. It is because they have simply fallen in love with a stock to trade with. Such tendencies can be suicidal as for as trading is concerned. It may cost any one dearly.

Source: http://www.stocklinedirect.com

http://sharemarket-srilanka.blogspot.co.uk/
Share this post on: redditgoogle

Slstock

Post Sun Oct 02, 2011 4:59 am by Slstock


Thank you. Useful article.

sriranga

Post Sun Oct 02, 2011 5:22 am by sriranga

@slstock wrote:
Thank you. Useful article.

Thanks.

rijayasooriya

Post Sun Oct 02, 2011 7:21 am by rijayasooriya

Really useful article.Give us good insight in to psychology of stock trading.Thanks for sharing and +rep.

rmark

Post Sun Oct 02, 2011 7:27 am by rmark

Thank you for sharing. This an important article for all of us to read.

avatar

Post Sun Oct 02, 2011 9:02 am by seyon

Thanks

sachithgh

Post Sun Oct 02, 2011 9:05 am by sachithgh

very usefull article
thank

bakapandithaya

Post Sun Oct 02, 2011 11:24 am by bakapandithaya

Thnks sriranga. useful for everyone

ISURU

Post Sun Oct 02, 2011 12:04 pm by ISURU

Useful article. Thanks & +rep from me.

Dr.Bubble

Post Tue Oct 04, 2011 10:06 pm by Dr.Bubble

good one........just thought to refresh by some incident which happened to my friend today....

he had 7000 REG at average of around 400,i think...........he had mistakenly placed a buy order of 7000@500 instead of a sell order........so trade executed,
until REG went down to 470,he was happy that he sold it...he ddnt aware that he had mistaken.
but after rechecking the orders he just realized that he did a wrong trade,so sold the whole lot of 14,000 at 450-470..

what a pity Sad

this is the DEADLIEST ...

mark

Post Tue Oct 04, 2011 10:32 pm by mark

@Dr.Bubble wrote:good one........just thought to refresh by some incident which happened to my friend today....

he had 7000 REG at average of around 400,i think...........he had mistakenly placed a buy order of 7000@500 instead of a sell order........so trade executed,
until REG went down to 470,he was happy that he sold it...he ddnt aware that he had mistaken.
but after rechecking the orders he just realized that he did a wrong trade,so sold the whole lot of 14,000 at 450-470..

what a pity Sad

this is the DEADLIEST ...

same here,i missed several times bcoz of my unconcentration,...
sometimes i bought thinking that im selling Evil or Very Mad ,even missing the stock code and put orders in wrong counters,bcoz lack of concentartion Sad

Kumar

Post Tue Jan 03, 2012 9:13 pm by Kumar

Very informatics one for this particular time.
Very Good one.
Thanks for sharing.

cseguide

Post Tue Jan 03, 2012 10:13 pm by cseguide

useful info

avatar

Post Thu Feb 09, 2012 11:46 pm by anees

Its good for the time bieng

Redbulls

Post Sat Mar 10, 2012 12:59 am by Redbulls

Very good one and answering so many questions.
Thanks friend.

speculater

Post Mon Mar 12, 2012 12:25 pm by speculater

we should have this post before market go down........however never too late for education.........

avatar

Post Mon May 06, 2019 5:28 pm by gnziet

Stock market tips, stock tips daily updated, free stock tips of nse bse, intraday stock market tips, swing trading stock market tips, indian stock markets tips 


moneycontroltips.in

ipo

Post Tue Jul 09, 2019 10:15 am by ipo

Thanks for the valuable info. This is a must-read for new investors.  Wink

Arrowrisk

Post Sat Sep 28, 2019 2:40 pm by Arrowrisk

@sriranga wrote:The following are 10 most common but deadly Trading Mistakes, which traders should avoid at all costs. Anyone of them can literally destroy one’s financial dreams and goals!

1. Trading for excitement & thrill Not for profits.
Many traders consider stock market as casino and trade for thrill and fun only. As soon as one has a losing trade, he wants to quickly make back the lost money. He thinks about the other things he could have done with the money, regret taking the trade and want to recover as quickly as possible. This in turn leads to further mistakes. Be patient and wait for the next high probability opportunity. Don't rush back in.


2. Trading with a high ego.
Many individuals who have remained highly successful in other business ventures have failed miserably in trading game. Because they have a fairly big ego and thought they couldn’t fail. Their egos become their downfall because they can not except that they would be wrong and refuse to get out of bad trades. Once again, whoever or wherever has any one come from does not concern the markets. All the charm, powers of persuasion, number of degrees & diplomas of business management on the wall or business savvy will not budge the market when you are wrong.


3. Three 4-letter words that will kill you! HOPE--WISH--FEAR--PRAY
If you ever find yourself doing one or more of the above while in a trade then you are in big trouble! Markets has own system of moving up & down. All the hoping, wishing and praying or being fearful in the world is not going to turn a losing trade into a winning one. When you are wrong just use a simple 4-letter word to correct the situation-GET OUT!


4. Trading with money you can't afford to lose.
One of the greatest obstacles to successful trading is using money that you really can’t afford to lose. Examples of this would be money that is supposed to be used in any other business, money to be paid for college/school fee, trading with borrowed money etc. Ultimately what happens is that when someone knows in the back of their mind that they are risking the money they can not afford to lose, they trade out of fear and emotion versus logic and no emotion. If you are in this situation It is highly recommend that you stop trading until you earn enough to put into an account that you truly can afford to lose without causing major financial setbacks.


5. No Trading Plan
If you consider yourself a trader, ask yourself these questions: Do I have a set of rules that tell me what to buy, when to buy and how much to buy, not just for the next trade, but for the next 10 trades? Before I enter a trade, do I know when I will take profits? Do I know when I will get out if I am wrong? These questions form the first part of a trading strategy. There simply cannot be any expectation of success if we can't answer these questions clearly and concisely.


6. Spending profits before you make them.
Nothing is more exciting than getting into a trade that blasts off and puts you into a highly profitable situation. This can cause major problems however, because this type of trade puts you in a highly euphoric state and leads to daydreaming about the huge profits still to come. The real problem occurs as you get caught up in the daydream and expectations. This causes you to not be prepared to get out as the market reverses and wipes off all your profits because you have convinced yourself of the eventual outcome and will deny the reality of the situation. The simple remedy for this is to know where and how you will take profits once you enter the trade.


7. Not Cutting Losses or letting Profits run
One of the most common mistakes made by traders is that they let their losses grow too large. Nobody likes to take a loss, but failing to take a small loss early will often result in being forced to take a large loss later. A great trader is not someone who has never had a loss. Great traders have made many losses. But what makes them great is their ability to recover quickly from a string of losses.
Every trader needs to develop a method for getting out of losing trades quickly. Research and learn to apply the best methods for placing protective stoploss orders.
The only way to recover from many (small) losing trades is to make sure the winning trades are much larger. After a series of losing trades, it becomes difficult to hold a winning trade because we fear that it will also turn into a loss. Let your profitable trades run. Give them room to move and give them time to move.


8. Not Sticking to your plans & Changing strategies during market hours
If you find yourself changing your strategy during the day while the markets are still open, be mindful of the fact that you are likely to be subject to emotional reactions of fear and greed. With rare exception, the most prudent thing to do is to plan your trading strategy before the market opens and then strictly stick to it during trading hours.


9. Not knowing how to get out of a losing trade.
It’s amazing that most of the traders don’t have any clear escape plan for getting out of a bad trade. Once again they hope, pray wish and rationalize their position. It must be kept in mind that market does not care what you think. It does what it does and when you are wrong you are wrong! The easiest way to keep a bad trade from going really bad is to determine before you get in, where you will get out.


10. Falling in love with a stock (Just Flirt).
Many traders get fascinated by just a stock or two and look for opportunities to trade in those stocks only ignoring the other profitable trading opportunities. It is because they have simply fallen in love with a stock to trade with. Such tendencies can be suicidal as for as trading is concerned. It may cost any one dearly.

Source: http://www.stocklinedirect.com
Thank you

avatar

Post Thu Nov 19, 2020 6:31 am by Quibit

Buffett, quoting partner Munger, says there are three ways to go broke: ‘liquor, ladies and leverage’

Warren Buffett believes investors should avoid using borrowed money to buy stocks.

“It is crazy in my view to borrow money on securities,” he told CNBC on Monday. “It’s insane to risk what you have and need for something you don’t really need. ... You will not be way happier if you double your net worth.”

In the “Squawk Box” interview, Buffett shared the wit and wisdom from Vice Chairman Charlie Munger.

“My partner Charlie says there is only three ways a smart person can go broke: liquor, ladies and leverage,” he said. “Now the truth is — the first two he just added because they started with L — it’s leverage.”

The Oracle of Omaha explained the perils of using debt and leverage in his 2017 annual letter to shareholders released on Saturday.

“Berkshire, itself, provides some vivid examples of how price randomness in the short term can obscure long-term growth in value. For the last 53 years, the company has built value by reinvesting its earnings and letting compound interest work its magic. Year by year, we have moved forward. Yet Berkshire shares have suffered four truly major dips,” he wrote.

He shared the data that revealed Berkshire Hathaway’s stock declined by a range of 37 percent to 59 percent multiple times over the last five decades.

“This table offers the strongest argument I can muster against ever using borrowed money to own stocks. There is simply no telling how far stocks can fall in a short period,” he wrote in the letter. “Even if your borrowings are small and your positions aren’t immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions.”

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