I asked a large group of stock traders what their worst trading mistake ever was and got a huge number of responses…but they all boiled down to these 18 killer stock trading mistakes. Avoid these and you will be ahead of the majority of traders who lose money…but knowing what the mistakes are doesn’t solve your problem – you need a solution…so I have offered a solution to each of them as well! So here are the 18 biggest trading mistakes that came up…

1. Letting emotion influence trading decisions…

When emotion goes up, intelligence goes down. When intelligence is low it is impossible to make money trading.

The solution is simply to use a properly backtested stock trading system to guide your trading and eliminate emotion completely. Once you have a trading system, then write a trading plan to guide you on all other trading matters not covered by the trading system.

Killer stock trading mistakes—letting emotion influence trading decisions
Killer stock trading mistakes—account getting hammered by a sudden adverse move in one stock

2. Account getting hammered by a sudden adverse move in one stock…

Set a cap on exposure to any one stock at some low percentage of your total account.

This cap would get lower as your account grows, but no matter how much equity you have, the aim is to ensure a TOTAL LOSS in one position does not hurt you too much.

3. Risking too much on one trade…


Risk a small percentage of your account on each trade, so if you get stopped out on a trade the loss is very small. As your account grows this number can be reduced even further.

Many authors say not to risk more than 2% of your account on each trade.

I think 2% is way too much for long term survival with a large account (depending on your trading style). Even 1% risk per trade can lead to large drawdowns.

Killer stock trading mistakes—risking too much in one trade
Killer stock trading mistakes—trading with money you can't afford to lose

4. Trading with money you can’t afford to lose…


The challenge is if you need the money for something in every day life it becomes very hard to follow your rules and trade consistently. Money you trade with can’t be ‘scared money’.

This means that you put it in your account and aim to never take out the capital – just profits as you grow.

This way there is no emotional attachment to the money and you can do what you need to do in the market without wondering how you are going to pay the rent this month if you are in drawdown.

5. Buying more of a stock that is going against you to ‘average down’…

This is a delusional approach to trading. Buying more of something that is going the wrong way does not reduce the loss of your initial investment. All it does is increase your exposure to a stock that is losing you money. My suggestion is to treat every single trade as a new decision which must meet your (hopefully strict) criteria to put your precious capital at risk. This is a very quick way to go broke in a bear market!

Killer stock trading mistakes—buying more of a stock that is going against you to 'average down'
Killer stock trading mistakes—predicting tops and bottoms

6. Predicting tops and bottoms…

Trying to pick absolute tops and bottoms is frustrating and impossible. Complex algorithms that attempt this will end up over-optimized and fail. Traders who try to do this will inevitably get impaled on an extension move they didn’t expect.
The great news is you don’t need to predict the top and bottom of a move to make money because there is plenty of profit to be had in the middle section of a move.

7. Letting losses get big / not cutting losses quickly / not using stop losses…

This is hugely common because most people don’t like being wrong. Most would rather hold on and hope that one day their stock will come back to even so they can get out and maybe even say they made a small profit… but it leaves their portfolio drowning in losing positions that are being held ‘for the long term’ in the vain hope of recovery.
As a trading coach I have seen this kill more portfolios than anything else.
My advice is set a stop loss in the market for every trade and don’t touch it. If you don’t like that then don’t trade because letting your losses grow rather than cutting them will ensure you lose money.

Killer stock trading mistakes—letting loose big or not cutting losses quickly

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