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Top 5 Costly Mistakes New Traders Make

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Today, I’m gonna talk about the top five mistakes new traders make and how to avoid these costly mistakes.

I’m gonna talk about the top five mistakes new traders make and why they are so costly.

First one is trading the wrong stocks.

Now what do I mean by trading the wrong stocks? Many things. Number one I’ll get asked in StocksToTrade Pro sometimes or on Twitter or elsewhere, you know illiquid stocks you know you need to trade stocks that have volume.

I don’t care if a stock has the greatest news in the world, has the most amazing pie in the sky projections it doesn’t matter if there isn’t volume. What does that mean? If you’re looking at low price stocks, which most of you probably are, say that one to 10 dollar range you gotta be looking at stocks that are trading a million shares or more a day.

If they’re not trading a million shares you need to avoid them. That’s what’s considered an illiquid stock, it’s very difficult to get in and out of those even with small position sizes and ultimately you’ll end up burning your profits just trying to get in and out of these stocks.

The next is focus on stocks that have ran in the past. The past tends to repeat in these momentum stocks. Day traders, while most day traders have ADD I think, they also have very good memories. Traders remember these tickers. I can do it in half a second.

You give me a ticker and 99 out of 100 times I can tell you if it’s run in the past. That’s programmed in my brain. It’s programmed in other day traders’ brains. Look for volume, look for stocks that have ran in the past.

The second mistake new traders make is not having a plan

I mean it sounds funny and you might scoff at it but you would be amazed at how many make this mistake. So many traders just say, hey this stock’s moving, I’m gonna buy it, I’m gonna make a couple hundred bucks. That is not a plan.

It might work once in a while but over time that will never work. You have to know why am I buying into this stock? And if I’m just buying it because it’s moving, you have to have more reasons, more criteria than that.

You have to look at the chart. You have to look at the news. You have to look at the sector. I mean all this stuff sounds complicated but we make it easy in these article. We make it easy in StocksToTrade Pro, where we break this down every day but look for multiple factors to your success.

One reason to buy a stock just because it’s up big or just because it’s in a big sector is not a reason to trade it. Line up as many variables in your favor and that is going to give you the potential for success.

Plan, plan, plan. Prepare, prepare, prepare. Don’t do random trades.

They will burn up your account as a small trader. They will burn you up in commissions. You’ll get frustrated and you’ll quit. With a plan you know what you’re gonna do before entry.

The third biggest mistake traders make and is probably the biggest is not stopping out when they said they would and letting losses run.

The beauty of low priced stocks is they make big moves. That means you can make big money. The problem is they can big moves against you. If you don’t have discipline and you don’t stop out where you said you would, this goes back to number two. If you’re in the stock without a plan, you’re doomed no matter what, but now number three is you have to stick to that plan and stop out where you said you would.

If you let losses run, you will just burn up your account and remember if you lose $500 you gotta make 500 just to get back to break even. You know, think about that. If you were planning on $100 loss and you stick to that loss, you gotta make 100 to break even.

If you let those losses get big, you gotta do so much work just to get back to where you were last week. If you’re staring at that trade and that red number is getting bigger, think about that.

Do I wanna go back to where I was two weeks ago? Or a month ago? Or do I stop out of this trade, revisit, retrade later today or tomorrow. Stick to your plan. No one ever said I’m gonna blow up my account in their trade plan. No one over wrote that down and said I’m gonna risk my entire account on this trade, but people do it everyday. Have a plan, stick to that plan.

Mistake new traders make is overtrading.

It’s common, I see it a lot when you hit a bad streak you know, things just aren’t working, trading is a very streaky business. Lots of times you find something that’s working and it works and it works and it works maybe days, weeks, months, and then it kind of dries up and goes away.

The oddest thing I see in new traders is they don’t over trade when things are going well. They’re happy with their 500 a day or their thousand a day and they walk out and they’re done by noon because they’re happy with their goal.

So they trade that one time a day or maybe that two times a day or whatever that number is. Then the bad times come, they start seeing red and they want to overcompensate and instead of making one trade a day they start making two, three, four, five.

I mean I’ve been there. Some of my, not some of, my worst trading days of my career were days that I made a ridiculous amount of trades because I kept trying to get that money back and all I did was compound the problems. Made it worse.

I just dug a bigger hole that I had to dig out of the next day and the next week. So it comes with experience but if you’re doing well trading once a day, twice a day, why would you ever expect that you would get out of a bad spot trading three, four, five, six times a day.

If anything the inverse is true. When things are going well trade more. Things go bad, avoid overtrading, that’s how you blow up.

The fifth and last mistake I think new traders make is not having the right tools and you know really for lack of a better term just being cheap.

People see websites, free websites, delayed information, not all the information or maybe they’re $10 a month or they’re $20 a month and they try and piece together this solution of getting all of the data.

Remember a lot of these websites, the data’s delayed you know, you might be getting news 30 minutes later than you’re getting it with StocksToTrade. The chart might be delayed 10 or 15 minutes so you’re not even seeing the price movements’ real time.

So if you’re trying to do it with a bandaid and a patched together quilt of free websites you’re really gonna struggle. For sure check out StocksToTrade. I mean obviously I’m biased but really one of the reasons I got involved with StocksToTrade three or four years ago was I recognized that it was like wow somebody finally got it right.

I was like that person I just talked about back in the day. I used to subscribe to, I don’t even know how many websites. I had to log into them. I had to remember the password. I had to update my java. I had to do all these things because I was trying to patch and duct tape this solution together.

StocksToTrade has all of the tools built in together and I think is truly the best way to maximize your success as a day trader.

If you’re already using StocksToTrade, let us know below. We’d like to know if you agree. If you think it’s the best combination of all the tools like I do and for sure avoid these five pitfalls, write them down, don’t make these mistake or if you do, recognize and try and get that little bit better.

That 1% better a day and you know, it’s one thing to make a mistake, but in trading and in anything, learn from that mistake and try and minimize your potential to make it again in the future.

In day trading we often say you either learn or you earn, okay.

You’re either making money on that trade or you’re learning something that you did wrong. Focus on that improvement idea and try and get a little bit better each day.
We really want to help you learn, grow and evolve and become a consistently profitable trader.