10 classic trading mistakes

July 2, 2012, 11:13 am Louise Bedford Yahoo!7

Follow these 'trend commandments', or you will be destined to experience the wrath of the markets.

Most professional traders would be able to teach you to trade their system in about two hours. Why then do so few go on to achieve profitable results, even after being taught by some of the best minds of the trading world?

It could be because those ineffective traders aren’t following the ‘trend commandments’. Follow these, or you will be destined to experience the wrath of the markets.

1. Thou shall not trade without a trading plan

Define your entry, exit and position sizing rules, or you will stumble around in the trading wilderness. Dogged implementation of your written trading plan is what it takes to succeed

2. Shirk the work at your peril

Yes, I know. It seems that everyone wants a piece of you and there's not much left for you. Sometimes it can feel that everyone's needs are more important than yours and you're being pulled in twenty different directions.

But, you've got to ask yourself - if you can't find the time today to learn about the sharemarket - when will you?

If not today, then when?

I can tell you that if you're willing to go through a little temporary effort, you could quite possibly set yourself and your family up for life. I don't want your song to be over before your personal music has begun. Embrace the work, educate yourself, and focus. The market will reward your efforts.

3.Envy is a sin

We compare ourselves to others. We look at their strengths and our own flaws and constantly feel like we're not worthy.

Confidence expands us. It makes us feel like there are boundless opportunities and that we are capable of magic. Jealousy shrinks us. It shrinks our mind, it shrinks our energy, and we become less.

Less capable.

Less resilient.

Make a pact with yourself this month. Aim to be the best trader, and the best person YOU can be. Don't compare yourself with others. Ignore them. Focus on yourself, and realise that you are worthy of success.

Every time you think about yourself unfavourably because you're comparing yourself with the achievements of others - stop, and change tack. If you're talking about it, stop mid-sentence. Every time you feel jealous, consciously realise it, change direction and think of something you're good at.

If you were as good a friend to yourself as you are to others, you wouldn't let yourself be sucked down the jealousy spiral. You are worthy of success, and you deserve it.

4. Keep accurate records

Keep track of your results, review your trading diary regularly. Don't slack off. The ones that you love deserve better than that from you. Heck, YOU deserve better than that from you!

5. Don’t quit too soon

Most people actually quit trading after their first four or five losses. That's why this is a game for grown-ups with a high level of emotional maturity.

With the current ups and some downs in the markets, some traders are currently as happy as fat rats in a cheese factory.

Others have already stumbled, head butted a wall and given up.

I can tell you with 100% certainty that in my first 3 years of trading, while I was trying to crack the code, I never realised where I would end up just a few more short years down the track. I shudder to think where I would be if I had given up and quit this exciting trading game. Give yourself time to learn.

6. Realise the value of support

Find traders who care about you. Lean on them during the good times and the times when you feel you're being tested. If you stick like glue to the methods I suggest, and the information I give you in my free newsletter, you'll be ahead of 95% of the other traders out there in 'hold and pray' land.

Given the right opportunities, you can manufacture any type of life that you want. You can MAKE almost anything happen for yourself and your family, if only you believe in yourself enough. You can rise above those that doubt you and pursue the things that feed your soul. You don't need to be buffeted by life's set-backs.

There's one thing I know for sure. You get to decide what type of life you want, and you get to choose how you will react to life's opportunities and setbacks. It's a shame so many people don't recognise the true power they hold in their hands.

7. Thou shalt treat trading as a priority

We can cheat on our dreams, just a little each day and no-one will even notice. An extra coffee with a friend, another sitcom while enveloped in the comfort of the couch, a Sunday sleep-in... and BLAM! - another week has gone past without you working on your trading plan, and without developing the skills you need that will rescue you from your humdrum life.

Yes, I'm talking to you (and me as well). Well... maybe not in the trading arena, but there are certainly things that I procrastinate on too. Everyone does. It's a part of human nature.

However, when we cheat and we don't do the hard things in life, it's corrosive.

It rusts your soul little by little. It erodes the very fabric of our dreams and goals, until we're so far away from what we really want, we can't get excited or passionate about anything. Before you know it, making lazy and weak choices becomes a habit, and it infiltrates every area of your life.

8. Thou shalt weather the storms of criticism

We have to stand up for our beliefs because it's only by our thoughts that we set ourselves apart from the masses who are not achieving trading greatness. Unless someone is in the exact position you want to be in yourself, don’t take their advice.

Change is never easy. If we don't make continuous improvement a priority, we will ultimately fail. Guard your attitude. Don't let negativity into your house, in whatever form it takes - your brother-in-law, the newspaper, or via a tweet.

9. Know when not to trade

Part of being a successful trader is knowing when to trade and when not to trade. The aim is to trade only when conditions are completely conducive to trading a given system. I make no apology for that. I will stand up for that belief and fight you for it if you dare to debate.

Almost all of the members of our Trading Game Mentor Program are not currently trading medium term equities.

This is because their systems are telling them that, at present, conditions are not in favour of the trader. When conditions are in favour of the trader i.e. the market is trending and has low/normal levels of volatility, they will trade them again. There is no shame in this. It's the mark of a professional to know when to engage, and when to have a break.

Keep in mind as well that not trading equities does not mean that these traders are not trading at all. Many have moved into other instruments.

Don't apologise for picking and choosing your ideal trading scenarios. The best traders are brave and know that trading a volatile, choppy market is like a knife fight in a phone booth. Heavy casualties are to be expected.

10. Rely not on only one income source

Those who rely on only one income source, or one instrument, are destined to fall like a house of cards when the trend falters. Diversity of knowledge is your life raft. Be afraid. Be very afraid. Not paralysed by fear, but motivated by it.

The time to learn about new instruments is BEFORE the one you are trading has stopped co-operating.

Develop your skills before you need to use them. Learning while calm is very different than learning while feeling forced or desperate. Don't wait until a crisis in your life occurs to learn how to trade. The time to act is now.

If you're still waiting for the profits to come pouring in, it may all be closer than you think. My advice? Devote yourself to your education, always read this newsletter and also, get my free newsletter by registering here. Do it now. Be determined to make your mark in the trading world.

Stay loyal to these trend commandments. Realise the gold I am handing you in these articles. Remember the importance of persistence. Refuse to give up, smash your rear-view mirrors and forgive yourself for your past mistakes.

Louise Bedford (www.tradinggame.com.au) has been a trader for over 20 years and is a best-selling author of books on the share market. Her titles include Trading Secrets, Charting Secrets, The Secret of Candlestick Charting and The Secret of Writing Options. She’s prepared a free trading plan template for you. If you want to trade like a machine so you can finally make the profits you deserve - go and pick it up now by registering at www.tradinggame.com.au.

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