[Soultrader]

I thought I'de start a thread discussing some of the mistakes new traders make when starting off with online trading. There are obviously hundreds (which I have committed all of them myself) so please feel free to add on to the list.

1. Undercapitalization - One of the first mistake I made when beginning to trade was being undercapitalized. I started with a $10K account without any idea on how to trade. You need enough capital to learn and gain the experience. Some like to call the initial stake "market tuition." If you can avoid paying your dues, great for you. But most new traders will lose their money. Just make sure you learn from every loss.

2. Having the approach to trading as a "learn as you trade" - Big mistake. "Learn as you trade" = losing money. Losing money can lead to emotional and financial stress and may even create enough fear in you making it hard to trade. Make sure you come prepared to the battlefield. Be a strategist. Sun Tzu said, "The battle is won before it is fought." Think about it.

3. Trading as a hobby - Take a look at your hobbies. Do they make money? Hobbies in general are entertainment that cost money. Do not approach trading as a hobby. Treat it like a business. Develop a business plan, have goals, and understand what you want out of trading.

4. Thinking that you know it all - The moment one thinks he knows it all is the moment he has become a fool. Its impossible to know everything about the markets. This is a lifetime learning process. Find your niche.... find your speciality and be an expert in it. In other words, find your edge. One thing I learned in trading is that niche = money.

5. Trading without a plan - One of the worst things you can do as a trader is to trade without a plan. Trading without a plan is like driving in a new area without a map or a navigation system. You are lost.

6. Not following your trading plan - Okay so now you have a trading plan. Why dont you just follow it? A common mistake among traders is not following a developed trading plan. This leads to impulse trading or emotional trading.

7. Wanting to be right - Are you trying to be right? Or are you trying to make money? This is a hard one... I personally have to battle myself to avoid this bad habit. Our egos interupt with our trading and we tend to want to prove something to ourself or someone else. The markets do not care what you think. You are in it to make money.

8. Money Management - Strict money management is a necessity. Set your risk parameters for all your trading setups. A common rule is to risk no more than 2% on one trade. I prefer 1%. Being long 10 different stocks at 2% risk per trade is not a good idea. In fact you are risking 20%. Know your size and do not double up your position after a series of losses. Be a grinder and not a cowboy.

9. Have realistic goals - Too many traders come into this arena without unrealistic goals. Questions like "Can I make a million my first year with a $10k account?" Sure you can..... but is that really realistic? Focus on crafting your trading. When you know how to trade the money will flow naturally.

10. Not analyzing yourself and your trades - This a poker habit I have. I tend to analyze every losing and winning hand to learn from it. Traders need to do the same and analyze every trade. Think about it after the trading hours and focus on what you can do to improve. Trading is a constant journey of soul searching as well. Understand yourself and you will significantly improve your trading.

I know there are tons of trading wisdon. Ill end it with just 10 and leave room for others to add. Best of trading.

[akkan]

thanks it was insightful

[steve46]

1.) In terms of actual trading, newbies lack the diverse background & experience needed to properly evaluate the environment around them. If a new trader were to sit next to me watching a chart develop, one would see just how significant that gap is.....as a professional I am going to recognize opportunity quickly while a newbie, even a talented one, would probably be too slow to see it, and too indecisive to pull the trigger.

2.) Clearly newbies are vulnerable to vendors selling a variety of products and services of questionable value. Again the lack of experience and background mean that newbies are vulnerable to being pulled off the "narrow path".

3.) Newbies underestimate the importance of risk management.

4.) Newbies underestimate the importance of waiting patiently for the right setup.

5.) Newbies underestimate the importance of documentation and learning from their failures.

6.) Newbies underestimate the importance of continued learning. Professionals often have a variety of skills including the ability to program (pick any computer language), to backtest or characterize markets, to use a spreadsheet, to understand and utilize basic descriptive statistics. Skilled traders are always learning about the markets, how they work, new rules, new developments...they continue to learn and improve their skill sets and most importantly they do so because they enjoy it....Newbies often have significant gaps in their understanding of how markets actually work.

7.) Finally and perhaps most importantly, newbies underestimate the importance of understanding human behavior. It is after all, human beings who move markets...understanding how other participants think and view the markets is critical to a trader's long term success.

I hope this helps.

Steve

[Qu|cksilver]

Newbies that wants to be a trader but they scared of losing money will make them lose more and more money. They cannot accept losing and what they want is always the winning.

Newbies must understand that investing is risky, any investment is risky. They think trading this type of market can make them rich quick.

Me myself takes time to understand about trading and market. Almost 5 years i have been trading and get nothing, all my money gone. Then i realize trading is not easy! no quick rich scheme! even the top successful trader also lose money.

Sorry for my english.