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(1) Not defining a trade objective before placing the trade.
It might be easy for many traders to jump in and place a trade. But when it comes to exiting, some don't identify their exit points and one of 2 situation will occur:
The market goes against them and some will hold on hoping that the market will recover. All the time they will be wondering whether they cut their losses or stay in.
The market goes in their favour and some will be wondering when to take their profits. Some will be holding for more profits every day and one day some news will come out and the market will move several points in the opposite direction at the open wiping out most of the gains.
(2) Thinking that the market is too high or too low to trade.
Many traders think that the market is too high or too low to trade at certain points and they don't place their trades. Occasionally they miss out on one of the best ever trades by not knowing that the market is going to do what the market is going to do!
(3) Spending too much money on trading tools.
A lot of traders start their trading with $5,000 and plan to spend over $1,500 a year on trading tools such as charting services, software or data services etc..etc. So they have to earn 30% before breaking even.
(4) Relying too much on others for trading decisions.
Getting "hot tips" from a friend or a broker.
Giving money to a mutual fund manager or a commodity trading adviser.
Subscribing to newsletters or hot lines not suited to them.
Just remember that nobody cares enough about your money except YOU.
(5) Using a trading system or a financial guru's method without backtesting.
A lot of trading systems for sale are over optimized or curve fitted to mislead the public. Some Financial gurus also use methods which are not suited to beginners or small capital traders. So, you have to backtest any trading system you are planning to use, check for curve fitting and then paper trade it for a while before putting your real money on the line.
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