Stock Trading - What mistakes have you made?

[Doomberg]

Ok so we get many threads like "this is the best way to do it" so i thought it would be a good idea to make a thread where people can add the mistakes that have had the most negative impacts on their trading, and hopefully we can learn from each other and avoid certain mistakes, i'll start:

Day trading with speculation.

There has been many times where i have been sat here thinking "damn it, no more day trading on speculation" and at the time im dead set on sticking to this rule, but as time passes i end up breaking my own rules (again) and often when i do break my rules i get stung, we've all done it and this is something im currently focusing on stopping, unless i have a good reason and following a minimum risk protocol.

Using winnings to increase the stakes.

Often when things are going well i have been known to up the stakes on positions, but from experience, getting cocky in a volatile market is bad, very bad. I'll use an example of when this has happened to me recently: I was on a Spread Betting account scalping the FTSE100 whilst simultaneously watching the charts of Wall St because FTSE was following Wall St massively that day with a small delay. Anyway i managed to shave a 4 figure sum in about 6 trades, was happy with the trades but seen an awfully attractive giant spike on Wall St, got greedy and jumped in with a large amount per point and lost the entire days takings! Which was then followed by:

Revenge Trading.

This for me is very bad, and i literally can't believe how many times i've been a victim to my own stupidity, the above Wall St trade led to this.. i lost a nice sum and then didn't accept it and instantly jumped in to another position that looked promising hoping to get the lost money back and ended up losing another large sum. Its a terrible feeling knowing that breaking your own rules have led to the loss... i hope this is something i wont be doing again any time soon.

Miscalculated Stop Loss

I've done this a few times, in fact i have done it this week and missed out on a right corker... After seeing the Japan Earthquake on the news i shorted Nikkei 225 with a nice amount per point and within seconds i was in equity of £100's and felt happy to just leave that position open, i'd been a bit silly and only put a stop loss of 60 thinking that it would be safe, and that this was a good idea as i'd get more £'s per pip... it bounced back, low and behold about 62 pips past my stop and then plummeted by over 1000 points, i was pretty angry.. but i believe was probably my own fault for trying to gain from an earthquake lol.

Listening to others

Although its great to get advice from others who are more experienced i have found its not always the best way to decide on whether to make a trade or not, i have had it a few times where friends / contacts have said something like "mate seriously you wanna sell your RBS shares and move on to x share" On the occasion im talking about i listened, sold the shares and then seen a 10% increase the RBS SP in a matter of days! And even lost on what he suggested, fortunately i moved them to something that got a nice gain but it was a reminder of how many times i have been told 'DYOR'

Summary.

So in my learning curve up to now, these are the biggest problems i have encountered and intend to keep these to a minimum, if i stay away from the above then things seem to go well but i have often slipped, knowing that im breaking my own rules and been stung, so i guess im gonna have to do what many have done and just be strong and stick to what i know works. As we know with this game its all about minimising risk and the above for me, have been the the main mistakes.

What problems do you encounter / have you encountered the most with your trading?

 

[brewski1984]

I know my biggest mistake is not cutting losses. I do it everytime. I know I'm doing it at the time and I still sit there watching and hoping and thinking "it always comes back".

 

[Doomberg]

brweski i think were all guilty of that, my biggest loss was on a bank spread bet with +£250 per point, kept widening the stop over days until at 10 points, boom 2.5k gone... **** doing that again ha

Any more guys? Or are you all immaculate traders? :cheesy:

 

[timsk]

Hi Doomberg,
It's the weekend which may explain in part why you've not (yet) had much response and, additionally, if we all wrote down the mistakes we made, each post would be a mile long and take an age to write! So, I'll cut it short by saying 'you name it - I've made it'. IMO, making mistakes is fine and to be expected. The slightly trickier bit is to identify them and then admit to ourselves that we screwed up. Psychologically, this is a tougher call as we tend not to like to admit to our weaknesses and failures. However, just as an alcoholic can't start the recovery process until they admit to themselves that they've got a booze problem, traders aren't going to put the necessary steps in place to eradicate their mistakes until they fully acknowledge them first. Having identified and admitted the mistake, the trader then has to find a solution. All of that is a piece of cake compared to the last bit which is where many of us (me included) tend to come unstuck. And that's having the discipline to follow through with the solution.

Take brewski (above). He's identified a problem of not cutting loses. He knows he must, yet he fails to do so on a consistent basis. This is a discipline problem. I too had this problem, and the solution for me is to use a trading platform that automatically places a stop when my trade is filled. To move the stop further away, I'd have to manually override the platform software. So, I have a rule to only ever move my stop in the direction of the trade - never away from it. Have I ever made the 'mistake' of breaking this rule? Noooooo, never!
:cheesy:
Tim.

 

[Wile E Trader]

One mistake that I use to make is not getting out of trades when the reason for trading them is no longer valid. I pass control over to hope and hope doesnt get you far in this game.

Leverage use to be another problem. I use to think of how much money I can make. Not how much I could lose.

 

[barjon]

"In 2000 Energis was a FTSE 15 company, providing Telecoms services to a Global client base, it was valued at £10billion. By 2002 it was bankrupt ..."

One day I opened up to find that Energis had gapped down significantly below the stop-loss level I had in mind. I wouldn't take the hit (hope triumphs over evidence) because I didn't want to see that much damage in my account (trading my account and not the trade). To make matters worse, I continually looked for additional long opportunities on every flimsy bit of price action evidence that arose (revenge trading)(adding to losers)(fighting the trend). Some of those longs went the right way, but I ignored exit signals in the interests of repairing the initial damage (trading my account and not the trade) and all of them generated further losses, although I didn't hang on to them forever as I did for the original position. Eventually I lost the lot and it's a good job I hadn't been leveraged or my account would have been bankrupt too. Taught me a lot did that one.

jon

 

[Doomberg]

Cheers for the input guys... all of the stuff above sounds oh so familiar to me...

But whats worst like some have mentioned is that, often the mistakes we make.. we make them due to lack of discipline.. i can sincerely say that most of my losses are from breaking my own rules, how many people still lose from doing this? And how many in time learned a true personal system and stuck to it?

Doomberg