Click here to get a PDF of this post


Mistakes

 

 

 

 

 

 

 

 

 

 

 

  1. New traders make the mistake of being biased to current market conditions and do not consider that it is only a phase, bull markets, bear markets, and range bound markets are a cycle that plays out over and over. From trending and non-trending to volatile and stable price action the market goes through changes and what is working for you now may not work for you next week or next year. Different trading methodologies are profitable in different market environments.

  2. New traders look at historical charts and confuse hindsight bias with being able to trade a market. Having price action unfold in real time day by day with real money on the line is a completely different experience than the calm and rational flipping through historical charts with a full view seeing what worked. It is like playing Madden 2014 and then believing you can play real NFL football because you are so good at the video game. Completing a pass in the virtual world is a nothing like completing a pass in a real game with a 300 pound linebacker running at you at full speed. This is the same for trading big accounts with real money.

  3. Equity buy and holders look brilliant this year having out performed the majority of active traders but they have not looked so brilliant for the majority of the time from late 2000 to 2011 as the market stayed in a big price range and inflation ate at their capital.

  4. It seems that the loudest and most aggressive voices from traders on social media is usually from traders that are bitter because they have not made money,and  for some reason they seem to be passionate about wanting to convert others to their way of thinking. Most the time when a trader wants to strike up some big debate about what works and what does not I am not sure if they are trying to convince me or themselves that what they are saying works. All I know is what has worked for me in my real accounts over the past 15+ years while I am open minded to trading better I am only interested in facts and real results, not theory or arm chair quarterbacking.

  5. Most traders look at systems that produce big returns and ignore the peak to valley draw downs or even the eventual ruin that will result from trading those systems. Very few traders and investors have the stomach to trade a system or hold a stock that has a 50% draw down. When most see Apple at $200 in 2008 and then at $700 in 2012 they think that was a good plan to just buy and hold it. However very few of those same people could have held it all the way down to $70 before it went to $700 or even been able to buy it at all time highs in 2012. This year Tesla looked like a dream trade but very few could hold it through the volatility even when it was trending up.