Many traders are their own worst enemies when it comes to trading…
And it frustrates me knowing that mistakes can easily be prevented if they weren’t so stubborn.
All of my millionaire students understand that trading can become very uncomfortable at certain times…
But what they’ve learned early on in their journey has helped them develop a foundation to work off of.
Before any trader even considers making any money, they need to start from the ground up…
That’s why I encourage all of my students to avoid these five most common mistakes that tend to send a trader packing early.
Table of Contents
1) Lack of proper education
Most traders fail because they don’t take the time to learn and understand the core principles of trading.
Just like anything in life, you need to put forth the time and effort if you want to be successful.
Most good traders have setups, catalysts, and patterns they like to trade.
By knowing what they are, tracking their results, and reviewing every trade, they are confident in knowing what their strengths and weaknesses are…
Which helps them create a plan before every trade they make.
Want to know some of the common characteristics of how a losing trader does it?
They dive head first into any trade and have no clue what to do next.
If I was to tell you a “hot” pick, could you describe to me your step-by-step move other than buying and holding?
Most traders can’t, and if you can, kudos!
I challenge all of my students by asking them what their next move would be to help break it down and learn the process.
Hot picks aren’t the answer, and neither is buying and holding.
Trading may seem overwhelming when you first start, but it doesn’t have to be…
This is why I encourage everyone who is just starting off to keep things simple and learn at their own pace.
2) Poor risk management
The only reason I have been able to stick around for over 20+ years in this trading world is because of my ability to cut losses quickly.
I’ve met way too many traders who double down or hold onto a stock thinking it’s going to bounce and it doesn’t.
Penny stocks are inherently risky, and when they are being pumped up by promoters they look to lure in newbies who don’t know anything about the market…
And then the next thing they know, the stock collapses right in front of their very eyes.
Here are a few examples of penny stocks where I’ve seen way too many traders get burned…
Cloudweb, Inc. (OTC: CLOW)
Meta Materials Inc. (OTC: MMTLP)
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GlucoTrack, Inc. (NASDAQ: GCTK)
You don’t need to be the world’s best trader if you are looking to make money…
You need to know how to manage your trades, know how much to risk every time, and be willing to cut losses quickly if nothing works as planned.
Once you continue to grow your portfolio, you are able to bend the rules a little because you’ll start to understand how these stocks work…
But in the early stages of your career, it’s important for you to understand the significance behind risk management.
Take small position sizes and learn the process!
3) Overtrading
Overtrading is a common mistake that can lead to losses.
Traders who are constantly in and out of the market and don’t have a clear strategy often end up making impulsive trades that do not work out.
Let’s face it, some traders who get into the stock market are just looking for that adrenaline rush…
From that moment the market opens to the market closes, traders are rushing to trade any stock they can get their fingers on.
The stock market isn’t supposed to be treated like it’s a casino…
It will eventually take everything you have.
This is why I encourage you to find other things to do throughout the day to prevent overtrading…
You don’t need to be glued to your chair in order to make money.
I focus on the best setups, mostly when the market opens to see if there is a morning panic…
And I will always be prepared to see if anything pops-up that is too good to miss out on.
4) Control your emotions
Emotions such as fear and greed can hinder any trader’s judgment and lead to poor decision-making.
Successful traders are able to control their emotions and make rational decisions based on market data.
Controlling your emotions isn’t easy, but if you are not willing to keep yourself in line, it’s going to be tough for you to consistently profit year after year.
There will be times when you expect a trade to work out in your favor, and then it doesn’t so you cut your losses…
Then shortly a few minutes later, it does exactly what you expected it to do.
Then it happens again, and again, and at that point, you grow increasingly frustrated…
And when you’re frustrated, sad, bored, whatever it may be…
Not being in check with your emotions can be disastrous for any trader.
5) Lack of discipline
Discipline is essential for traders if they want to be successful.
Traders who lack discipline may deviate from their trading plan, or take unnecessary risks when they shouldn’t have.
One of the biggest things I see newer traders suffer from is FOMO.
I suffered from FOMO and it turned around to bite me really quickly.
You can see all of my trades right here
If I was to give you $10,000 to trade or $100,000 to trade with, that’s not what makes a trader successful or not…
It’s the ability to understand everything I mentioned today and put all of the pieces together.
I’ve seen way too many traders start with a large trading account and they lost it faster than those who started with a small account.
At the end of the day, it doesn’t matter how much money you’re trading with, you’ll ultimately lose it all if you don’t understand the basics.
I’ll see you in chat!
-Tim
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