Trading Mistakes

Trading Mistakes & Mishaps

We all do them, myself included. Common reasons for these trading errors are:

• Not having a disciplined plan
• Not following the one we do have
• Listening to others instead of your plan and program
• Fear of loss
• Entering on borderline or barely visible indicator signals
• Prejudging a turn 

Mine is prejudging a turn before it actually occurs, thinking I know better. Dumb move. As a result, I have resolved to never enter a trade without valid signals. No exceptions.

Remember, we all share the same emotions, fears and anxieties. It’s how we deal with these issues that make the difference.

For example, trade plans will not avoid the occasional effects of adverse press releases, hedge fund dumps or negative market conditions. However, with the employment of stop loss procedures, we can minimize those events. The SAR indicator can be very helpful here in staying with a trend or your individual percentage/point preference. Just make sure you have that reference point in mind before any trade.

In short, it all starts with having a disciplined plan. The results will  demonstrate the benefits of your technical resources and plan for positive probability trading.

Additionally, our collective focus should not be to compete with some other investor or market average but to learn from any errors, improve on the last record or result and obtain an acceptable monetary return.

Order Entry & Validation
On end-of-day programs with signals, one must wait until the last minutes of the day. The reason is signals can fade intraday. Alternatively, one can enter the following day near the prior day close, which is generally superior and safer. This is more art than science.

We all need to refuse to enter any order unless we have valid signals with appropriate confirmation. A majority of signals does not count. To avoid losses, make sure all indicators in your program are in agreement. The last one to signal = entry point. In my view, a minimum of three is required, lead first by a WMA as outlined previously.

Market Pendulum Model
The time frame trend model works, answers a lot of questions and solves a lot of problems. That’s because it coincides with the natural order of time, trends (of growth, maturity & decline) and the motion of emotion. 

The model has demonstrated reliable and consistent results over many years with a few performance runs in a top shelf category. That is not meant to imply everyone can or will achieve similar results. However, if there were a better way to track trends, we would be using it. 

Make sure you understand and follow your personal model and plan too.

In Conclusion
Success can never be absolutely guaranteed but religiously following a disciplined plan can be.

With the right tools and plan, we can put the probabilities in our favor and help ourselves avoid those self-inflicted mistakes and mishaps we have all experienced.

Related Reading:
Dealing with Losing Trades - Dan Norcini - Click here

Apr 2015 (Updated 2022)