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The following are 10 most common but deadly Trading Mistakes, which traders should avoid at all
costs. Anyone of them can literally destroy one's financial dreams and goals!

1. Trading for excitement & thrill Not for profits.


Many traders consider stock market as casino and trade for thrill and fun only. As soon as one has a
losing trade, he wants to quickly make back the lost money. He thinks about the other things he
could have done with the money, regret taking the trade and want to recover as quickly as possible.
This in turn leads to further mistakes. Be patient and wait for the next high probability opportunity.
Don't rush back in.

2. Trading with a high ego.


Many individuals who have remained highly successful in other business ventures have failed
miserably in trading game. Because they have a fairly big ego and thought they couldn't fail. Their
egos become their downfall because they can not except that they would be wrong and refuse to get
out of bad trades. Once again, whoever or wherever has any one come from does not concern the
markets. All the charm, powers of persuasion, number of degrees & diplomas of business
management on the wall or business savvy will not budge the market when you are wrong.

3. Three 4-letter words that will kill you!


HOPE--WISH--FEAR--PRAY
If you ever find yourself doing one or more of the above while in a trade then you are in big trouble!
Markets has own system of moving up & down. All the hoping, wishing and praying or being fearful
in the world is not going to turn a losing trade into a winning one. When you are wrong just use a
simple 4-letter word to correct the situation-GET OUT!

4. Trading with money you can't afford to


lose.
One of the greatest obstacles to successful trading is using money that you really can't afford to lose.
Examples of this would be money that is supposed to be used in any other business, money to be
paid for college/school fee, trading with borrowed money etc. Ultimately what happens is that when
someone knows in the back of their mind that they are risking the money they can not afford to lose,
they trade out of fear and emotion versus logic and no emotion. If you are in this situation It is highly
recommend that you stop trading until you earn enough to put into an account that you truly can
afford to lose without causing major financial setbacks.
5. No Trading Plan
If you consider yourself a trader, ask yourself these questions: Do I have a set of rules that tell me
what to buy, when to buy and how much to buy, not just for the next trade, but for the next 10
trades? Before I enter a trade, do I know when I will take profits? Do I know when I will get out if I
am wrong? These questions form the first part of a trading strategy. There simply cannot be any
expectation of success if we can't answer these questions clearly and concisely.

6. Spending profits before you make them.


Nothing is more exciting then getting into a trade that blasts off and puts you into a highly profitable
situation. This can cause major problems however, because this type of trade puts you in a highly
euphoric state and leads to daydreaming about the huge profits still to come. The real problem
occurs as you get caught up in the daydream and expectations. This causes you to not be prepared
to get out as the market reverses and wipes off all your profits because you have convinced yourself
of the eventual outcome and will deny the reality of the situation. The simple remedy for this is to
know where and how you will take profits once you enter the trade.

7. Not Cutting Losses or letting Profits run


One of the most common mistakes made by traders is that they let their losses grow too large.
Nobody likes to take a loss, but failing to take a small loss early will often result in being forced to
take a large loss later. A great trader is not someone who has never had a loss. Great traders have
made many losses. But what makes them great is their ability to recover quickly from a string of
losses. Every trader needs to develop a method for getting out of losing trades quickly. Research and
learn to apply the best methods for placing protective stoploss orders. The only way to recover from
many (small) losing trades is to make sure the winning trades are much larger. After a series of losing
trades, it becomes difficult to hold a winning trade because we fear that it will also turn into a loss.
Let your profitable trades run. Give them room to move and give them time to move.

8. Not Sticking to your plans &Changing


strategies during market hours
If you find yourself changing your strategy during the day while the markets are still open, be
mindful of the fact that you are likely to be subject to emotional reactions of fear and greed. With
rare exception, the most prudent thing to do is to plan your trading strategy before the market
opens and then strictly stick to it during trading hours.

9. Not knowing how to get out of a losing


trade.
It's amazing that most of the traders don't have any clear escape plan for getting out of a bad trade.
Once again they hope, pray wish and rationalize their position. It must be kept in mind that market
does not care what you think. It does what it does and when you are wrong you are wrong! The
easiest way to keep a bad trade from going really bad is to determine before you get in, where you
will get out.

10. Falling in love with a stock (Just Flirt).


Many traders get fascinated by just a stock or two and look for opportunities to trade in those stocks
only ignoring the other profitable trading opportunities. It is because they have simply fallen in love
with a stock to trade with. Such tendencies can be suicidal as for as trading is concerned. It may cost
any one dearly.

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The following are 10 most important rules which can turn you a consistent Winner if applied
properly with discipline

1. Divide your Risk Capital in 10 Equal Parts.


As part of the Successful money management, it is always advised to divide your Risk Capital (which
you can afford to lose) into 10 equal Parts and at any given time none of your Single Trade should
have more than 3 parts of your capital in it even if you are in a winning position. At the same time
always keep some spare money for any Buying Opportunity, which may come any time.
2. Trade ONLY in active & high Volume
Stocks/ Futures.
Many Traders get stuck with stocks for want of liquidity. Always rely upon Stocks which have
reasonably high volume over a period of time. High Volume are always advised for easy Entry, Exit
and Stop Loss. In low volume stocks the spread is too high and chance of Stop Loss limit getting
failed is too high as there would be no Buyer or seller at your Stop Loss Level.

3. Come Prepared with a Trading Plan


Successful traders always keep their Trading Plans ready before entering into any transactions. One
must prepare a Watch List or Probable candidates for Day's trading and remain focused on the
movement of those stocks only. For example a Stock 'X' is on verge of a Bullish Breakout from any
pattern or stock 'Y' has declined substantially after an initial sharp upmove or stock 'Z' is close to an
important support level. Successful trader would concentrate on the movement of those stocks only
and enter the trade as soon as stock 'X' gives the anticipated breakout or stock 'Y' starts an upmove
or stock 'Z' breaks the support level to initiate a trade for quick gains.

4. Never Over Trade


This is the most common mistake committed by Traders, particularly after a Streak of winning
Trades. This mistake generally not only wipes off all the profits, but puts traders in heavy losses. In
order to remain in market while making consistent Profits, under no circumstances, traders should
go beyond their Risk Capital.

5. Trade in 2 to 4 Stocks at a time with strict


Stop Loss.
In a Bull move, most of the stocks move up and similarly in any Bear Move, most of the stock moves
southwards. As a Trader you know this fact but can you Buy 20 Stocks and try to make profit in all
the 20 stocks just because all are moving up or vice versa in a Down trend? What will happen if
market reverses without any indication on any bad news? Would you be able to monitor all your
trades in such situation? Smart and Successful trader would trade in 2 to 4 stocks with strict Stop
Loss and keep a strict vigil to avoid any misfortune in case of any eventuality.

6. Sell Short as often as you go Long.


More than 90% of common investors/ Traders are 'Bulls' by nature. Because they love to see prices
going up only. Stocks are bought by anybody/ corporate/ financial institutions/ Mutual Funds to
make profit on rise. They have large holdings and mentally they wish and pray for the market to rise
only. But facts are different. History shows that Bull Phases have shorter duration that Bear phases.
So every stock that moves up will retrace back to 38%-50%-66%. Since 90% investors are Bulls by
heart they normally do not book profit at higher levels to re-enter later at lower levels instead they
prefer to increase their portfolio at lower levels. Successful Traders know how to capitalize such
correction. They are always prepared to go 'Short' as often as they trade

7. Don't Trade if you are not Clear.


Many Traders, because of their daily habits trade even when there are no signals to buy or short.
Normally such situation arrives after a sharp rise or decline when stocks are adjusting their values.
While some stocks attempt to move up, few may be taking breather before next move. Such
situation are often confusing. There is no harm in taking rest for a day or two or short period if the
trend is choppy, unclear or doubtful, instead of putting your money at higher risk.on 'Long' side.

8. Don't expect Profit on Every Trade.


If you consider you are a smart trader who can make profit on every trade, you are 100% wrong.
Always be flexible and accept the fact as soon as you realize that you are on wrong side of the trade.
Simply get out of the trade without changing your strategy during the market; it may cause you
double losses.

9. Withdraw portion of your profits.


The business of Trading is excellent as long as you are making profits. Unlike other business your
losses can be unlimited and rapid if market does not move as per your expectations. While in other
businesses you may have other remedial measures available but in trading it is you only who has to
control it. Traders have large egos particularly after series of successful trades and their tendency to
enlarge commitments in overconfidence may cause major financial set back. There fore it is must
that trader must take a portion of the profit and put it in separate account. This is absolutely must
for long term stability in the market.

10. 'Tips'/'Rumors' can ruin you sooner or


later- Don't follow them.
Tips and Rumors are part of the game in Stock market. In most cases these are spread by vested
interests through brokers, media, analysts, or other rumor mongers in the interest of any particular
company well before their IPO's, or to reduce/enlarge holdings or whatever reason. But instead of
relying on Charts which are the translated copy of Price Action of any scrip based on demand supply.
While you may be lucky if you have had made profits on such 'Tips' but there are 100% chances that
you are likely to be trapped in sooner or later if trading on 'Tips' or 'Rumors' is part of your strategy.
Believe in Charts, act on Charts. There is no second best option.