Fed up with making mistakes in the Market?
You don't have to.
Of course, you'll never get it right all the time. In fact, you can be wrong more times than you are right, but still make money.
It's the old story. Run your profits and cut your losses. So why don't people adhere to that simple maxim?
The answer of course is - human psychology.
But here are six of the common mistakes and how you can cut down on them or eliminate them altogether.
Mistake #1 Unrealistic Expectations
Amateur traders are always looking for that big "home run." The truth is, it rarely exists.
Big hits are great when they happen but time has proven over the last century that the way to true wealth in the Stock Market is slowly but surely.
And the best example of this is Warren Buffet himself.
Mistake #2 Tips
It's insane to listen to other people. Usually people who haven't got a clue!
Don't do it.
Do your own research and formulate your own opinions. You will do far better.
Even so-called "experts" are not worth listening to.
And the biggest source of mis-information is newspapers. It's dangerous to take tips from them.
Block out from your trading any information that has not been researched by yourself. You are your own best advisor.
Mistake #3 Education
It is unbelievable the number of people that get into the Stock Market with little or no knowledge.
Virtually trading the Markets on a whim or a hunch.
How crazy can this be?
Study the Master Traders of today and yesteryear, they all had something in common - they traded toaset of rules.
Read the classics and formulate a set of rules for yourself.
Mistake #4 Only Trading Bull Markets
Bull Markets do not last forever.
Yet some investors can only think of rising Markets. They don't seem to get it that Markets move down as well and that many fortunes have been made in falling markets.
Trying to buy stock in a falling Market is a fool-hardy pastime.
Also, a lot of money can be made in a sideways moving Market.
There are traders who only trade trending markets. Buying when prices are at the bottom of a range and selling short when prices come off the top of a range.
And they do this day in - day out.
Mistake #5 Poor Money Management
Sounds simple. But most Market traders hardly understand it.
The object of "the game" is to stay alive. If you lose all your money you're out of the game. You can't play anymore.
You can't think about what you will gain, it's more important to focus on what you can lose.
You MUST limit your losses.
If you were to lose 50% of your capital that means you have make 100% gains to just get back where you were.
The trick is to admit that you are in a bad trade and therefore lose the least amount possible in such a position.
That's why you need to set automatic stops on your trade. That way you will not be subject to emotional decisions.You've made the decision (by setting a stop) when you placed the trade.
Good money management.
Mistake #6 Over-trading
It is a fundamental mistake to think that you have to be in the Market all the time.
You don't. Be patient.
Jesse Livermore, arguably the best trader of all time, went fishing when the Markets went quiet.
I'm not suggesting you do that but wait for the right trade. A good trade will eventually come along and you need to be ready for it.
Over-trading is for amateurs.
In conclusion, set yourself rules. And stick to them.
Do not listen to outsiders or let yourself be influenced by anyone or what you may read in the newspapers.
Be patient,wait for the right trades to come along - which they certainly will.
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Peter Woodhead is the webmaster of several Stock Market related websites. He specializes in the old classics. And his Long Lost Stock Trading Secrets contains works by Charles Dow (Scientific Stock Speculation), William Hamilton (The Stock Market Barometer), and Richard Wyckoff (How I Trade and Invest In Stocks and Bonds).
http://www.LongLostStockTradingSecrets.com
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