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After treating trading like a get rich quick
scheme, my next stock market advice tip #2 and most common
mistake, is to approach the market without a plan. Without a
trading plan, traders approach the market in an inconsistent
manner. One day they trade stocks and the next they trade the
foreign exchange. Or, they may use one set of indicators one
day, and the next day they will throw these indicators out the
window and take on a completely new set. Without a consistent
approach, the only thing governing their trading decisions is
really emotions, and that will doom them to failure.
If a new trader has managed to skip these last
two mistakes, they often fall down when they try to go it alone.
This is my Stock Market advice #3, all traders should find
themselves a coach, or a mentor. Someone who can help them spot
the errors in their system that they might not have noticed. An
outside point of view can help you avoid other costly mistakes,
and greatly increase your profits.
These are some common and quite basic mistakes.
The next errors I’ll mention are ones that are just as prevalent
in the trading industry, but they often occur once traders have
been around for a while. I have some personal experience with
these mistakes. Let’s call this stock market advice list, the
three most expensive mistakes I’ve made.
My stock market advice mistake tip #4, or the
first most expensive mistake, I made was to search for the “Holy
Grail” of trading. This was an incredible waste of both time and
money. During the first three years of my trading career, I
spent over $25,677 on a library full of books, videos and
seminars as well as spending thousands of hours in search of the
perfect trading methods. Honestly, 95% of what I bought was pure
junk… I should have listened to my mentor earlier and realized
the “Holy Grail” of trading is simply excellent money
management!
My stock market advice mistake tip #5 or the
second most expensive mistake I made was not having a predefined
exit point. Early in my trading career, I remember trading a
stock I thought had a high percentage chance of rising. I was
too confident. I fully leveraged the position. Unfortunately,
when things did not go as planned, I did not know when to exit,
and was paralysed. I kept rationalizing why I should hold onto
that stock. As the stock continued to fall, I made more and more
excuses. At the very end, I remember thinking, “I can’t take it
anymore!”
I sold out. That, of course, was the point the
stock turned.
I learned two very valuable lessons that day.
First, always have your exit points predefined. Second, big
losses once started out as small losses, and it is much easier
to take a small loss than a big one.
My Stock Market advice mistake tip #6 or the last
most expensive mistake, I made is not one that took money out of
my pocket; instead it was a mistake that made me leave money on
the table. In fact, this reoccurring mistake cost me big.
Early on, I remember selling positions as soon as
they showed a profit. I would not let my profits run, as I was
too afraid to give the money back to the market. I figured the
profit as mine. The result was that I ended up selling the
stocks that were making me money.
It wasn’t until my mentor explained to me that
when you are trading, and showing a profit, that is the point
where you should be adding to the position, not closing it out,
that I began to understand what I was doing. Once I started
following his advice, my trading profits soared.
Trading is not an easy profession, but it give
you great rewards. Avoid these common errors on my Stock Market
advice list, create a simple, well-designed trading system, and
learn your market. If you take the time to study the market, and
learn from other’s mistakes as well as your own ,
you will become a successful trader.
ABOUT THE AUTHOR
David Jenyns is recognized as the leading expert
when it
comes to designing profitable trading systems.
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