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Mistakes are a part of trading. Every trader makes them. But the most successful traders in the world—the ones who make huge profits every year—are the ones who make the least number of mistakes. The following is a list of ten common trading mistakes. Once you’ve learned to avoid these errors, you’ll expand your knowledge of the futures and options markets and increase your chances of making more winning trades.

#1. FOLLOWING THE CROWD

Although it’s been said there’s safety in numbers that statement almost never applies to trading. Successful traders know that it’s better to “lead the pack” than it is to blindly “follow the herd.” Because the biggest profits are made by catching moves before the crowd has a chance to react, it’s important that you form your own opinions and then act on them with total confidence.

#2. REVERSING YOUR POSITION

If your position is wrong, avoid the temptation of making a 180-degree turn. Instead, get out and give your trading a rest before taking another position. Ignore this advice, and you run the risk of being whipsawed—losing as the market moves against you, then losing more when the market turns and goes against you again.

#3. TRYING TO PICK TOPS AND BOTTOMS

The smartest traders always let the market price action prove a top or bottom has been formed before taking an active position. Trying to pinpoint tops and bottoms is a risky business where the possibility of taking a loss far outweighs the potential gain. By exercising patience and waiting for a definite high or low to appear, you’ll increase your odds for making a profit while reducing your risk and stress. [Read more]

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Photo by tarotastic

On Risk

Worry is not a sickness but a sign of health if you are not worried, you are not risking enough.
Always play for meaningful stakes if an amount is so small that its loss won’t make any significant difference, then it isn’t likely to bring any significant gains either.
Resist the allure of diversification.

On Greed

Always take your profit too soon.
Decide in advance what gain you want from a venture, and when you get it, get out.

On Hope

When the ship starts sinking, don’t pray. Jump.
Accept small losses cheerfully as a fact of life. Expect to experience several while awaiting a large gain. [Read more]

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