Trading Mistakes to Avoid

Buying an expensive trading system is usually a waste of money. Many are total gimmicks. Some promise fantastic results or a secret indicator that works like magic. The way to become a successful trader or investor is to acquire proper trading knowledge. This can be achieved by studying and learning from legendary traders who have amassed fortunes. Traders such as Jesse Livermore, Bernard Baruch, Gerald Loeb and William J O’Neil. Read their books, study and learn their methods and principles. Implement what you learn into your own trading. This will take time. You do not become an engineer or some other professional in a short period of time. It is the same with trading.

A big mistake many traders make is to trade from the newspapers. This is a bad policy, because most of the time, the price has already reacted to the news by the time you hear it. This means, the stock market, the futures market, or any other trading venue, has most likely, already discounted the news you are reading or hearing. Learning to read charts, which is price and volume analysis, is a much better option than trading from the news.

One of the most expensive mistakes a trader can make is to guess at market tops and bottoms. It simply can not be done with any kind of consistency. An incredible amount of money has been lost by fishing for market bottoms or trying to figure out exact market tops. A good policy is to wait for appropriate confirmation through your technical and fundamental analysis, before taking a position in the market. It is much easier to make profits from the middle of a significant trend, than from the bottom or top.

The mistake of averaging down in price when trading can be devastating to your account. Some traders believe they are getting a better deal this way, but in reality they are throwing good money after bad. Averaging down in price means you have to take on more positions. Many times this leads to overtrading. It also means you are now bucking the trend, which is bad policy in itself. You are also now trapped in the psychological illusion of “hope”. You hope the market will turn around and save you. Averaging down in price is a dangerous game, which ultimately will get you, if played enough times. Avoiding these, and other trading mistakes will do wonders for your trading account.

Gary E Kerkow is the founder of Tradingmarkets4u.com. This site provides information to help traders and investors become successful. Kerkow has over 20 years of trading experience including stocks, futures and options. He implements the strategies, methods, techniques, principles and psychology of the world’s best traders and investors. This includes Jesse Livermore, William J O’Neil and others. Visit my website at www.tradingmarkets4u.com