Trading Mistakes: Avoid at all Costs

Traders are human and we all make mistakes. However, successful traders learn from their mistakes and capitalize from their experience using their next opportunity. Many of the items listed below are obvious but are not known by novice investors and can be forgotten by experienced traders.

Common Mistakes to Avoid while Trading:

  • Failure to cut losses: Pride, ego, or stubbornness prevents the trader from selling.
  • Not knowing “how much” to trade on each position: Overtrading positions can kill your account and take you out for good (risk of ruin). (Learn to position size)
  • Average down in price: Placing good money after bad is a loser’s game.
  • Listening to rumors: Forget the talking heads, rumors and tips as they are nothing but garbage and a sure way to substantial losses
  • Lack of patience: It takes years to master trading as an advanced skill; even then, you are never done learning or adapting
  • Not knowing when to sell: Determine your price objectives and risk-to-reward ratios prior to entering the trade; never allow emotions to make this decision.
  • Buying 52-week lows: Don’t be afraid to buy stocks making new highs. The garbage sits at the bottom along with weakness and downward momentum. Buy strength and the momentum moving higher.
  • Pure Fundamentalist: Technical analysis is a must! Use candlestick charts that show the price, volume and major moving averages – this is all you need, don’t complicate the process.
  • Making trading decisions based on taxes: Never buy or sell based on taxes alone.
  • Buying based on dividends: Don’t buy based solely on dividends; most growth stocks will never give out dividends
  • Buying familiar names: Yesterday’s leaders are not likely to be tomorrow’s stars. Look for solid new companies with great earnings, sales and a product in demand. Don’t buy a stock based on a popular household name.
  • Lack of action: Be able to move on a dime. Time is money, don’t procrastinate or hope for something that may never happen.
  • Lack of Consistency: Develop a method suited to your personality; stick to it and don’t trade blindly.

The secret to winning big in the market is not to be right all the time but to lose the least amount of money possible when you are wrong. As long as you win larger than you lose, you will become a consistent winner at the end of each year.


  1. I never hear about all the mistakes made by not
    having the guts to hang on to a stock that has done nothing but find new product and make the business bigger and better every month, sure the movemnet is great, but the rwards are greater….

    Look at PBR 3 years ago, I still have substantial stake. who cares what happens in short term, I got my cash out and now I look forwrd to the rewards…..

    All the quitters bailed….

  2. Would you consider scaling into a position averaging down? I would think there are others who are using an averaging down strategy of some sort who consistently make money. At least I do, for the past few months…

  3. While I know what the guys that use technical analysis are looking for, I’ve never seen any reliable study where technical analysis can be quantified as it’s very subjective, and not a science. I’ve spent 30 years trying to find a good method of quantifying TA with reproducible results, and so have many of my successful professional trading friends. That being said, if TA works for you…..that’s great.

    Good post, by the way.


  4. Jeff,
    All I can say about my own experience is that I am yet to meet a multi-million dollar trader that doesn’t use technical analysis. I am not a multi-millionaire but I have been making consistent profits since 2002 using a combination of fundamental and technical analysis. I have always tweaked my tools by speaking to a few of them and it has helped. Emulate the ones ahead of you is my motto.

    It’s working so I am not going to change direction.

  5. Jeff

    we are here to make money or trade well…whichever works for you use it…fundemantals is about logics, unfortonately markets are about perceptions it never obeys logic…if that were the case…all companys would be winners..

    keep the good work CHRIS….i know use TA before i do any options Trade


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