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Thread: Trading Mistakes

  1. #1

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    Default Trading Mistakes

    Ten (or More) Huge Trading Mistakes

    Acknowledgement: Trading for Dummies, Griffis, Epstein, Wiley Publishing, Inc., 2004

    More actually! Huge trading mistakes that befall experienced and novice trader. Included are some items to recognize, mistakes and ways to avoid them. Any additional suggestions to help steer away from these pitfalls would be appreciated in reply.

    I. Fishing for Bottoms.

    - In a bear market stocks get much cheaper than most of us ever expected or wanted. They won't stop falling until they've run out of gas.

    - There are few good reasons for buying stocks when it is stuck in a trading range. Your best opportunity occurs when the stock breaks out of it's trading range, thus, wait until you are sure.

    II. Timing the Top.

    - Tops and bottoms share something in common. They rarely arrive when they're supposed to.

    III. Trading Against the Dominant Trend.

    - Confirm your analysis by looking at the charts that are one time period higher i.e., if you are looking at daily charts, confirm your analysis on the weekly charts.

    - Always know which part of the market cycle you are in.

    IV. Winging It.

    - If someone says a stock is hot, it's only a reason to look into the fundamental and techinical conditions of the stock, but not a reason to buy it. You can always buy it if futher analysis confirms it's the right thing to do.

    V. Taking Trading Personally.

    - You can't let a bad trade get to you. The market isn't out to get you; it's out to get your money. Get used to it.

    VI. Falling In Love.

    - Trading is like a business. Stocks are your inventory. Don't fall in love with your inventory. They are there to sell, at a profit if possible.

    VII. Using After-Hours Market Orders.

    - You are likely to pay a lot more than what you wanted, or sell for considerably less using after-hour orders.

    VIII. Chasing a Runaway Trend.

    - If you miss the entry point for a stock that you want, waiting is better than entering a position as a trend accelerates. Often a stock will pull back and test the breakout point. Wait for that point, or wait for the stock to take a short breather after it's first leg up.

    IX. Averaging Down.

    - Averaging down is really merely a techinique to throw good money after bad.

    X. Ignoring Your Stops.

    - When you start thinking you want to give a position a little more room to work it's way out of losing territory, you're on your way toward a trading debacle.

    - Close your position when the price hits your stops.

    XI. Diversifing Badly.

    - Exposing all your capital in one trade is a bad idea, and so is trading hundreds of stocks simultaneously.

    - You may start with a dozen and settle on six or so. You could re-create the S&P 500, but to buy and sell that position would cost a bundle.

    XII. Enduring Large Losses.

    - Your sucess depends on how you handle losing trades. If you dispose of the losers quickly, you can become very sucessful. If you hold onto losers you can lose so much money that it may knock you out of trading.

    A loss of........% Gain to Recover.
    5%...............5.2%
    10%.............11.1%
    25%.............33.3%
    50%.............100%
    75%.............300%
    100%............Game Over

    -


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  3. #2

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    Default Re: Trading Mistakes

    Looks like my playbook!
    Weatherweenie's Account Talk
    Expected retirement date: November 2023

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  5. #3

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    Default Re: Trading Mistakes

    Thanks, Spaf! Some on that list I've already learned the hard way. Some I'm still trying to internalize. I'm sure the ones I don't remember will end up costing me some more. :toung:

    Lady

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  7. #4

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    Default Re: Trading Mistakes

    Nice post Spaf. Anyone trading markets should print this and keep it close to their computer screen.

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  9. #5

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    Default Re: Trading Mistakes

    Ooops, there goes another rubber tree plant. Frank Sinatra for the younger set.

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  11. #6

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    Default Re: Trading Mistakes

    Quote Originally Posted by Birchtree View Post
    Ooops, there goes another rubber tree plant. Frank Sinatra for the younger set.
    But you have ... HI-I-GH hopes ....

    Lady

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  13. #7

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    Default Re: Trading Mistakes

    Great post by a guy who has dedicated his life to the psychology of trading. I've read it twice and man do I love it. I am so sick of hearing all the BS excuses on a day to day basis.

    The analogy I like to use as a way to agitate these folks is, "It's like blaming a failed sports career on an injury or an umpire."

    Victims don't win, because--in a fundamental way--they do not see themselves as in control of their own destinies. They attribute their losses to bad luck, the market manipulations of others, or random, situational factors. It's difficult to change problem patterns if you don't own them. It's difficult to sustain confidence if you don't perceive yourself to be the driver of your own destiny.

    Trading victims mostly come in two flavors:

    1) Permabears who complain that markets are manipulated/distorted when their own views and theories are getting hammered;

    2) Active traders who whine that markets are not giving them enough opportunity.

    I can't help the former group. They really aren't interested in trading or investing. They are interested in promulgating their theories and conspiracies.
    http://traderfeed.blogspot.com/2009/...as-victim.html

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  15. #8

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    Default Re: Trading Mistakes

    Gary is pretty good. I like points #3 and #5.

    Trading mistakes

    Today I’m going to share some of the goofs and blunders that I’ve made over the years and hopefully keep some of you from making the same mistakes.
    http://garyscommonsense.blogspot.com...-mistakes.html

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  17. #9

    Default Re: Trading Mistakes

    Good stuff. I think I could have written that myself. I have made every mistake imaginable over the years.


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  19. #10

    Default Re: Trading Mistakes

    This may not seem relevant, but there is a great parallel between trading and poker playing in my opinion. While I had modest success playing cards years ago when I was single and kid-less, I was never able to understand how some of the more wild players were doing so well in no limit games and tournaments. It seems reckless to me.

    I recently read a book by Gus Hansen, one of the wildest players out there, but also one of the most intelligent (he's also plays championship level backgammon). The book reveals hand for hand commentary and insight of a tournament played, telling why he is doing what he is doing. He had a recorder with him and he took notes the whole way. It opened up a whole new world for me on how to approach the game.

    So, I'd like to be a fly on the wall of a highly successful trader, to hear what he thinks and how he reacts to simple situation that every trader faces every day. Oscar does that to some extent, but he is a day trader exclusively and does not hold positions over night. That is not he style I would want to follow.

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  21. #11

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    Default Re: Trading Mistakes

    Quote Originally Posted by tsptalk View Post
    This may not seem relevant, but there is a great parallel between trading and poker playing in my opinion. While I had modest success playing cards years ago when I was single and kid-less, I was never able to understand how some of the more wild players were doing so well in no limit games and tournaments. It seems reckless to me.

    I recently read a book by Gus Hansen, one of the wildest players out there, but also one of the most intelligent (he's also plays championship level backgammon). The book reveals hand for hand commentary and insight of a tournament played, telling why he is doing what he is doing. He had a recorder with him and he took notes the whole way. It opened up a whole new world for me on how to approach the game.

    So, I'd like to be a fly on the wall of a highly successful trader, to hear what he thinks and how he reacts to simple situation that every trader faces every day. Oscar does that to some extent, but he is a day trader exclusively and does not hold positions over night. That is not he style I would want to follow.
    Wouldn't we all like to get in the Goldman Sachs "trading huddle"?!

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  23. #12

    Default Re: Trading Mistakes

    Quote Originally Posted by fedgolfer View Post
    Wouldn't we all like to get in the Goldman Sachs "trading huddle"?!
    They are great at what they do, no doubt, but they seem to move the market their way, rather than react to it like most traders have to do.

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