My 5 Biggest Trading Mistakes in Stock Market

29 May

All stock traders had their good and bad days. In my years of trading in stocks, index futures, commodities, and options, I would say that I made a lot of mistakes and therefore lose money or make profits lesser than what I am supposed to earn. The worst of all these was that I kept repeating my same mistakes again and again. I knew where I had gone wrong in my trading strategies. I would like to put up this blog post to share with you of my trading mistakes as well as to serve as a reminder to myself so that I will not repeat it. I look at financial speculation as a serious business and I am adamantly committed to this course to unlock the secrets of the stock markets. It is one thing to know the workings of the stock markets, and another to get rid of our natural habits that are not built for financial investment and speculation profession. We must work hard to improve our trading skills and accuracy as well as getting rid of the bad habits that is in-built in us that cause us to lose money in the long run.

5 Big Lessons that You Can Learn from my Trading Mistakes

  1. Exit stocks position and take profits too early.
  2. Too focused in short term market fluctuation rather than the longer term market outlook.
  3. Too much trading activities.
  4. Committing too much percentage of my trading capital in my initial trade entry.
  5. Allowing myself to lose money in a streak by refusing to walk away from the stock markets.

Stock Market Principle #1: Cut your Losses Quick and Let your Profits Run

In my attempts to maximize profits, I became too smart. I try to outsmart the market by thinking that I can temporarily exit my profitable position during market correction or retracement. I said that I would buy back the shares when it reaches the market bottom. It sounds good and sounds wise too. But far from the truth of the matter, the stock market corrections usually seem to be very brief and suddenly the stocks prices gap up and shoot higher and higher. In my attempt to bring in more profits, I actually paid more trading commissions and also the loss of profit opportunity. It also increases my risks level because I have to buy back the shares at higher prices. On one occasion, I exited too early and see the stocks soars higher up to 10x of my entry level. Argghhh…..

Stock Market Principle #2: Power of Multiple Time Frames and Strength of Longer Term Market Trends

Basically I always based my market outlook on the longer term stock market trends. I often look at stock charts using monthly, weekly and daily multiple time frames. Weekly and monthly candlesticks chart shows the primary direction of the stock market. It is also less susceptible to market noises. If you and I were to base purely of monthly and weekly stock chart prices, we could profit much from the longer term market trend. However, I do use hourly intraday chart for quicker action on fast moving markets like commodities and index futures. Nothing wrong with using hourly chart. It is just that most of the time, the longer term market trend based on the monthly chart or weekly chart takes precedence over the stock movement. The problem that I faced is that I am too focusing on market fluctuations rather than stock market trends. Instead of looking up to the stock market primary trend and riding the market waves, I constantly clear my profitable portfolio too early. I discovered that I was wrong but it was too late. Damaging to my wallet, it is. So, by not using longer term market outlook and combining it with multiple time frames as a confirmation indicator, I lose money and cut my profits away quickly. Argghhh…..

Stock Market Principle #3: Active Trading in Stock Market Kills

The following concept or advice is one of the most important pieces of stock market wisdom you might hear before. Do nothing but sit on your position. Yes. Idling can be the best action that you take. My problem is that I trade too often. It is my bad habit to get in and out of the market so frequently. That shows how immature I am. Most the money that I made was just doing nothing but holding on to my winning position. I have to tell myself repeatedly "Hold! Hold! Hold! Don’t exit your winning position yet." Again, and again, making the same mistake. I have to change my bad trading habits. Argghhh…..

Stock Market Principle #4: Never Over Trade.

Greed kills the fishes. That is why fishing works all the time. Decades after decades, fishes would bite the bait. The fishes never seem to learn. So are we in the world of financial markets. We are always the fool, the meal, and the dumb fishes. Oh, I forgot to tell you, no matter how many generations had passed, the fishes never learn from their parents on how to feed wisely without getting killed. I can’t blame the fishes because it is just an instinct. So are we. I often commit more than I should in my initial trade only to find out that the confirmation has not been given after a trading signal had triggered. As long as there is no confirmation, the trading signal can be void and the prevailing trend resumes its course. "Ben, you better remember not to over trade. Wait for confirmation for the chart patterns. How many times it catches you just like the fishes?" Argghhh…..

Stock Market Principle #5: Understand your Personal Ebb and Flow Cycles

Sometimes, personal cycles of ebb and flow set in. Like it or not, someday isn’t made to be your day. You can use all the techniques you know and proven before, it just doesn’t want to work. The same goes for the stock market. As in the case of Mercury retrograde from the geocentric perspective, sometimes technical analysis signal just fails outright. So, whenever I had a string of continuous losses, I told myself to stop trading for a day or two. This is the technique I devised to cut down the effect of personal ebbs and flows that surround us. Some other people called this luck factor. Whatever you call it, just remember to stop trading when you have a streak of losses. Break the pattern of losing in stock market just as what Anthony Robbins teaches about habits and breaking disempowering belief system. My failure to walk away from the stock market always causes me more than what I am willing to pay. Argghhh…..

It is not the techniques of analyzing the stock markets that I lacked but the good trading habits that are lacking in most if not all traders and investors. That is why 80% to 95% of the investors and speculators are losing money in the stock markets. People like fishes aren’t built to trade in the financial markets. Greed is like baits that draw the fishes to the hook. Nevertheless, losses are good for traders because it shapes them to be a better one. Just like what was said in the Bible, that it was easy to take the Israel out of Egypt but it was hard to take Egypt out of Israel. Think about this. You might be focusing on the wrong learning path. Many people focus on the stock picking techniques and market timing methods but only few are focusing on money management and the habits of a better stock trader. I promised myself to be a better and wiser investor and speculator. See you at the top.

13 Responses to “My 5 Biggest Trading Mistakes in Stock Market”

  1. chinesealbumart 29 May 2009 at 7:38 pm #

    Good advice !!

  2. chinesealbumart 30 May 2009 at 12:59 am #

    Good advice !!
    Sorry… forgot to say great post – can’t wait to read your next one!

  3. stock trading for beginners 20 June 2009 at 4:01 pm #

    great post and essential for the beginners, thankyou

  4. stock trading for beginners 20 June 2009 at 4:07 pm #

    that is fantastic advice. I am not sure if my latest post so thought I would sya again that for beginners, this advice is fantastic. I have lost my shirt on trading before so this kind of advice is essential,

    look forward to the next one,

    stock trading for beginners

  5. Top 27 June 2009 at 11:38 am #

    Same as futures trading (see Market Wizards) e.g. Let your profits run, cut your losses short. However it depends on what type of trader u are e.g. scaper, day trader (mainly for futures trading) , short term or long term traders. Time frame also depends on type of market, mainly trending or non-trending.
    Type of trader depends on your comfort zone (character).
    Type of market on your analysis.
    One word —– DISCIPLINE!

  6. Mikel Comiso 30 December 2009 at 11:45 pm #

    Good researched article! This post is actually the most factual on this deserving topic. I concur with your conclusions and will eagerly look forward to your future updates. Thanks for the great clarity in your writing. Authentic work and much success with this excellent site!

  7. Deb 3 August 2010 at 6:36 pm #

    Although I do day trading, your remarks are too-the-point for me too. I often did similar mistakes. Greediness is the worst, and the source of many mistakes: It makes you not get out of a winning position in time, waiting to gain more just when the market changes direction and you lose. It makes you trade too much, exposing yourself to more risk and entering foolish positions.

    Thanks for this posting.

  8. torrents sites 16 June 2011 at 6:04 pm #

    Practice makes us perfect in the same way mistakes make us to learn alot and after that we hardly commit it.

    If we commit mistakes then there is nothing wrong however committing mistakes again and again make it wrong. We should learn from it like the way you did.

    SO cheers

  9. brian 4 October 2011 at 12:51 am #

    i think most important mistake is not sticking to a plan that is determined before entering trades. lots of people give up because they dont stick to their system/discipline. strong mind is so important in trading.

    Weekly Options

  10. weslyku 5 March 2012 at 12:10 am #

    I like this post very much.Thanks.

    The mistakes i did in trading are exactly same with what you had mentioned above,especially fifth stock market principle.This is really enlighten my trading life.

    Looking forward for your sharing.

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