Common Trading Mistakes

If you can make money day trading the financial markets then you have the opportunity to change your life. With the extra income you can save for something you always wanted to, pay off your debts or maybe even give up your day job and become a lifestyle trader. You can trade from wherever you want to, so maybe do that travelling you've always dreamed about.

But of course, to do those things you have to become a successful Day Trader. Being successful means that you are consistently profitable. Sure you will have losing days, all traders do, but overall you need to be making money. There are so many financial products available to trade it's hard to list them all. You can trade futures, forex, commodities, options and even crypto. Some of these are straight products from the CME (Chicago Mercantile Exchange), some are based on independent global marketplaces (such as Forex) and some are based on CFDs (Contracts for Difference), which are derivatives in a tax friendly wrapper.

One of the most popular set of products to trade are US Futures. This is a regulated market with a lot of liquidity so you know that you're getting real market moves and that your buy and sell orders are going to be placed at the right time. Markets to trade include the Nasdaq 100 (NQ), S&P 500 (ES) and the Russell 2000 (RTY). These are available in either e-mini or micro e-mini formats; the micro e-mini being the cheaper of the two. So there are e-mini NQ, e-mini ES, e-mini RTY, micro e-mini NQ, micro e-mini ES and micro e-mini RTY. And so the list goes on with other CME products that you can trade.

When you learn to trade you realise that making mistakes comes with the territory. Whether you are trading or investing you are going to make some bad decisions. To become a good consistent profitable trader you must be able to learn from these mistakes so that you can overcome them in the future. Remember, learning to trade requires both focus and self-discipline. Great traders keep calm throughout the trading day, waiting for the market to come to them.

So what are the common mistakes that traders make, we've listed them below.

No Trading Plan

The first mistake that many traders make is not having a trading plan. Your trading plan is what keeps you focused on your trading, it reinforces consistency and discipline.  The plan outlines the types of trades you will take along with the types of trades you won't take. It is built up over time based on your learning and the output of your daily trading journal (this is where you record which set-ups worked well, which didn't etc.) and your best times to trade. Trading can be heavily driven by emotion (Trader Psychology) and to be successful you need to be a calm, unemotional trader. Your Trading Plan acts as your reference point and will stop you making silly mistakes. Basically, if it's not in the plan then don't trade. If a short trade isn't working then switching it to a long trade is not necessarily the solution. Remember you are a trader not a gambler!

No Risk Plan

Your Risk Plan goes hand in hand with your Trading Plan. While your trading plan documents the type of trades you will and won't take, the risk plan documents how much you are prepared to lose when you are trading. Your risk plan should be created based on your overall risk profile. That means you should never trade more money than you can afford to lose. The funds you use for trading should be seen as expendable because you are speculating on the opportunity to generate outsized gains. To create your risk plan requires a detailed look at your personal finances and a realistic view of how much you can afford to lose. It's often a good idea to consult with others in your household as their view on that amount as their view may be different to yours. Once you have a risk plan it will dictate whether you trade e-minis or micro e-minis and how many contracts you trade at a time.

Not Learning your Craft

A lot of people think that trading is a get rich quick scheme and that you can make your fortune overnight. It is not and you cannot. If you are looking for a tradesman for your house, you typically want to find somebody who is qualified and has experience. Let's say you're looking for a plumber. You would expect them to have appropriate qualifications and be able to show that they've put all the theory into practice. You probably expect that for them to get to that point will take a few years. Well it's similar with trading, you can't become a competent plumber overnight and equally you can't become a competent trader overnight. A lot of people will fail at trading because they just don't spend enough time learning, both before they start and when they're trading. You must have a constant learning and feedback loop. Many people are too eager to just put money down based on gut feel rather than researched set-ups. Then they lose money and say it didn't work but they didn't set themselves up for success. Make sure you set yourself up for success. If you don't have the time or don't want to dedicate the time to learn and improve then stop now, it will save you pain and money.

No Stop or Target

Every book you read on trading will tell you about the importance of a stop so that your cap any potential loss. Yet, many people still trade without a stop. This is crazy because it means that you haven't pre-set your risk level and therefore your risk is not under control. If you don't have a pre-defined stop then you are not going to be able to trade in a consistent way according to your risk profile. It is similar with a target. You should know how much you want to take out of a trade before you enter. Again this is based on your overall risk profile and your trading plan: what do you want/need to get out of each trade. Trading without a stop is downright dangerous, the markets can move very quickly!

Trading Multiple Markets

We get it, with your new found trading skill you want to try different markets, don't! You may think you are opening yourself up to more potential trades but, believe us, you are just diluting your learning. And you are better off focusing on your learning. Just pick one market and focus on it. There will be enough trades on a single market to make a good return. The more you watch a market the more you get a feel for the rhythm of the market and understanding the rhythm of a market is what enables you to identify and take better trades.

Chasing the Market

OK we've all done it at some point. The market is going up and up and you think it's going to carry on doing it. Or it's going down and down and you think it's going to carry on doing it. The law of probabilities say that this is not going to happen but your head tries to tell you otherwise. But if you enter in one of these circumstances not in accordance with your trading plan you have to ask yourself what are you trying to achieve. If you thought it was a good setup and entry point then it would be in your trading plan right? So if it's not, don't do it. It will lead to losses and worse than that if you chase the market one way and lose you may want to revenge trade it the other way to make your money back which is not a good idea.

Underestimating Your Abilities

I bet you didn't expect to see this one here, did you? Well yes, it's a thing. A lot of people think that investing is only for big banks and phd mathematicians which can get in the way of their learning and ability to succeed. Start with the mindset that you can become a successful trader and you will be on the right track.

Summary - Acceptance and Learning

Trading has its ups and downs (if you'll pardon the pun). The markets are different everyday and sometimes trades that worked in one type of market won't work in another. So you have to get used to losing as well as winning. If you can accept that you will always have losses while at the same time analysing those losses to see if you can mitigate them, then you will be on a winning track. Remember, you will not learn it overnight but it is possible to learn enough to become consistently profitable. The simpler you make the journey, the faster you can learn.

With Inteligex you don't need to learn complicated technical analysis. It gives you all the indicators you need to make great trades day in and day out. Importantly the Inteligex 3 Step Process brings discipline to your process which gives repeatability and helps with your trading psychology. Inteligex is supported by full training and support, we're with you every step of the way.

To find out more about how it works sign up for your FREE no obligation Personal Consultation.

Useful Links: What is a Recession, The Problem with Economic Forecasts, What is Monetary Policy, What is Fiscal Policy, Picking Stocks in 2023, Your Best Shot at Goal, Speculating vs Investing, Profile of a Futures Trader, Invest in Yourself

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