Top 6 Trading Mistakes – How to Beat the Common Pit Falls of the Average Trader

You might have heard that 95% of traders are unsuccessful. Unfortunately it is true. But this is because most traders are making the same mistakes that the other grinning 5% have avoided. Research has shed light on certain mistakes they all seem to have in common. If you can avoid them too, you will be far closer to joining that 5% than ever before.

Some of these common trading mistakes may be familiar to you. This isn’t the first time they have been revealed, but that hasn’t made traders avoid them. So read carefully, and get ahead of the average trader.

1. Losing your cool:

If you can’t control your emotions, you will probably make a lousy trader. You simply can’t make wise decisions when driven by anger or despair. Losses are part of the stock market, When they happen, you need to pick yourself up, and move on. Remain objective like the most successful traders, even when you were wrong about your position.

2. Trying to trade too many markets:

There are well over 50,000 markets in the US alone. You can’t trade them all, and there is nothing to be gained by trading more markets than you can monitor. It’s better to trade a few markets and know them well, than spread yourself out too thinly.

One or two markets is recommended, especially for short term traders. Long term traders can afford to trade more markets of course, but still no more than 4, unless they move relative to each other. Don’t follow the crowd, the crowd loses more often than not.

3. Trading Greedy:

Yes let your profits run, but for how long? The stock market isn’t the place for emotional decisions, and greed is certainly the most destructive for traders. If you have made a descent profit from a favorable trade shift, especially if it’s out performing the market in any way, it’s probably best to cash it and run. Most traders push their luck too far, hoping for a windfall, and lose because of it.

4: Not using enough stop orders:

Stop orders are one of the easiest ways to protect yourself from significant loss. But did you know it would be better to use stop losses all the time, than not at all. Of course, don’t place them too tightly, or you’ll be out of the market before a significant move, but simply placing more of them will set you apart and ahead of the average trader.

5: Reversing your position:

As tempting as it may be when in the wrong position, make a point of not making any immediate 180 degree turns. A position will never continue in the same direction forever. If you have been going against the market in a certain position, then reverse it, you risk having it turn against you again. A comeback is inevitable.

:6 Not doing your homework:

All of the above mistakes and many more could pretty much come under this one. Most traders simply don’t know any better, but if they had taken the time to invest in their personal knowledge of the stock market, they might have been avoided. You can’t afford to go with this trend of blind trading.

Trading is demanding, and those who are successful at it are committed enough to study charts, and learn two major abilities – how to evaluate any trading method, and maximize their profit potential in any market. Don’t leave your success to chance.

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To learn how you can do the two things listed above and a whole lot more, i highly recommend this free resource – The Profit Button. “The 4 simple steps successful traders know that you don’t.” This small meaty ebook is a must read for traders of all experience levels. So start reading, and start profiting. Peter Bosch is an accomplished author who specializes in most internet related subjects.

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Article Source: www.articlesnatch.com

~ by forexrobotwhh on December 3, 2008.