Common Pitfalls of New Traders

The team at High Chart Patterns, a stock picks newsletter, wrote in with this article on trading.

“We have written extensively on what we believe traders should do in order to become successful. Today we are going to focus exclusively on what you should NOT do.

1. Join a Chat room: We are strong advocates AGAINST chat rooms. Why? Because it’s a distraction. In order to become a successful trader you must treat it as a business, not as a hobby. The typical chat room filled with hundreds of traders with different styles calling out trades every two seconds are not conducive to making money. But, you ask, what about the idea, the more eyes the better? Our answer, don’t be so lazy! Do the homework the night before, set up your own stock lists, and focus on those stocks instead of waiting for some guy living in his parent’s basement (no offense to anyone living in their parent’s basement) to call out a possible trade for you. If you pick out the cleanest charts every night, then most likely you will have plenty of work ahead of you the next day. You might miss some moves, but the point of trading is not to be involved in every great stock move, but rather to grind out a profit in a consistent manner. However, we do like the idea of trading buddies — for example, 3-5 people who trade in a similar fashion as you. That is an asset. Chat rooms are not.

2. Overtrade: Over-trading is possibly the single biggest mistake that traders make, hopping from one trade to another like a bunny rabbit, without waiting for the initial trade to work itself out.
There must be a reason for every single trade. Become spiritual about it: every trade is sacred. Treat every trade as a business-man (or woman) would a business transaction. To relate this to the previous point, chat rooms naturally cause one to over-trade as one is anxious to be involved in multiple calls. Do not be greedy — wait for the set-up, if the conditions you seek are fulfilled, pull the trigger, and then wait for the trade to develop, be it in a stop-loss or in a profit.

Always try to make today your best day by being faithful to your system, your rules, and more than anything else, dedicate yourself wholly to a trading regime at the Altar of Discipline. Discipline is the thin blue line between making it, and blowing it.”