10CommonMistakes

10
new traders

10 COMMON MISTAKES
NEW TRADERS MAKE
Trading is a skill and with learning any skill there are pitfalls and missteps along the way. Understanding
that mistakes are part of the process and learning to reduce them could help you develop a more
disciplined, consistent approach to trading.
Here are 10 of the most common mistakes that new traders make.
1. EMOTIONAL TRADING
Nobody can properly prepare a new trader for
the emotional roller coaster and even the most
experienced traders grapple with this after
years in the business.
Why is it so difficult to control your
emotions? It may lie in our genetic
make-up. Matt Golden, market analyst
for TraderPlanet, discussed the science
of trading and emotions at the VantagePoint
Power User Seminar in Tampa in February.
“When you feel emotions while trading, there is
a physical, chemical reaction that is happening
inside of you. These chemical levels are different
for everyone. This is why trading is different for
everyone, “Golden said.
Golden points out that the emotions you feel
are an involuntary response to those chemicals.
This is part of human evolution, so it must be
understood, and then controlled.
“You have evolved to avoid pain and
discomfort and developed a flight
instinct. This is why most traders
embrace flight. Flight from the market
(at the worst time), flight from systems
(because of the discomfort of drawdown), flight
from success. This is all normal,” according to
Golden.
However, learning to take the emotion out of
your trading is integral for long term success.
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10 Common Mistakes New Traders Make

2. POOR PREPARATION AND PLANNING
In trading, Winston Churchill’s famous quote,
“Fail to plan, plan to fail” rings especially true.
When you enter the market arena, you
had better be prepared. However, few
traders perform the necessary due
diligence before moving headlong
into the markets.
You can’t just walk into the market with a
handful of money and expect to take money
away from the professionals. If that’s the case,
you’re gambling, not trading. Many who trade
successfully rely on a trading plan. Just like
how a business plan outlines the establishment
and development of a proposed business in
detail, a trading plan outlines, in detail, a
structure for trading.
Trading plans are fluid in the sense
that they are being tested constantly
and amended to improve overall performance
and profitability, but strict observance of the
rules of the trading plan is often the hallmark of
a successful trader.
3. FAILING TO PUT A TRADING PLAN IN WRITING
By writing down your trades in a journal, you
can learn from your mistakes. But all too often
newer traders fail to write things down and
therefore fail to see the patterns and habits they
may be forming.
When you write down your rules everything
changes. Instead of hoping that the
market is going to do what you want, or
you wondering if you should just hold
on a bit longer, you go and look at your
rules and they will tell you what to do.
Once you write down your trading plan’s rules,
you have a base to work with, which will allow
you to grow and expand your plan to
capture any market insights you
learn while implementing it.
This changes the dynamic of
mistakes. Mistakes are now not
about whether you win or lose on a trade.
Rather, they are about whether you follow
the rules of your plan. It establishes discipline
in your trading, which is critical to your success.
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10 Common Mistakes New Traders Make

4. A LACK OF OBJECTIVITY
Most traders don’t want to acknowledge that a
trade could turn against them. They enter the
market assuming they’ll be successful, refusing
to look in the rearview mirror. It’s also
common for emerging traders to use
a calculator to predict how much
they’ll make and how they’ll spend the
unrealized profits!
Entering the market with a neutral
attitude is a good approach. You need to
believe anything can happen in the market at
any time. This is what being objective is all
about. A profitable trader needs to be thinking
constantly that the market can do whatever it
wants whenever it wants at any time. Many new
traders get into trouble by thinking the market
can’t or won’t do certain things.
To be objective, you cannot put your
demands and expectations on the
market. This doesn’t mean that you
can’t have an opinion about the market.
It only means that your opinion can just
as easily be wrong as it is right. And you
need to be completely ready and comfortable
for it to be wrong. You need to release yourself
from having to be right. The more objective you
are, the less you will distort the information you
receive.
5. INABILITY TO ACCEPT LOSSES
New traders often become overly discouraged
with losing trades. You need to remember
that losses are part of the game of
trading. Every trader will have some
losses. In fact, many successful
traders have many more losing
trades than winning trades. But
they still make money because their
winning trades are considerably
larger than their losing ones. You must
think of your losses as part of the expense of
doing business as a trader.
Just like any business, trading involves having
such expenses as your technical analysis
software like VantagePoint, you
data feed, your commission to your
broker, etc. Losses are just another
expense. Always try to keep them
to a minimum but realize you will
have this expense in your trading.
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10 Common Mistakes New Traders Make

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6. NOT USING STOP LOSSES
Newer traders will listen to other people who
will incorrectly them not to use stops, because
the market will find them and take them out, or
other nonsense like that. Guess what?
The way the market moves is very simple to
understand. If there are more sell orders,
the market will go down, and if there
are more buy orders the market will
go up, regardless of where there are
stops no matter what asset class2 you
trade.
Some people don’t want to use stop
orders when trading because they are caught
up in thinking that the market will hit their stop
orders and then immediately start moving in
their direction after they’re stopped out. And
you know what? This will happen sometimes.
For people who attempt to use mental stops
(where they’ll just get themselves out of the
market instead of putting the stop order in the
market), the problem comes when the market
does go through their mental stop orders,
then reverses and starts moving back in their
direction. Usually, these people are at a loss
as to what to do next. And the unfortunate
thing is that it usually costs them a lot
of money, as they do not act in their
best interests. They let losing trades
turn into huge losing trades.
All sorts of trading gurus will proclaim
that use of stop orders is the best chance for
achieving long term success. Most traders
don’t have enough discipline to get out of their
losing positions without using stop orders.
7. IMPROPER RISK MANAGEMENT
New traders often make one or two mistakes
when it comes to determining risk; they either
define the reward first, which is a mistake
born out of greed, or they put a stop loss
on the setup that is much too close to
the entry to give the trade a chance at
working out.
When learning to think in probabilities
and to view the market in terms of risk to
reward, it is necessary to calculate the risk on
a trade setup first, then you can calculate the
reward as a multiple of the amount you
have at risk. By concentrating on the
risk first, instead of the reward, you
are making yourself more aware of
the risk involved on each trade setup,
instead of becoming fixated on how big
of a reward you might make, as many
traders do. This will also turn you into a “risk
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10 Common Mistakes New Traders Make

manager”, rather than a “trader”, the best traders
in the world know that consistent trading profits
come as a result of managing risk effectively, so
consider yourself a manager of risk from now
on.
Personal psychology influences our thinking and
decisions about money. A trader should never
risk money they can’t afford to lose. Certainly,
no one wants to trade with the goal of losing
money but one must be ready and prepared for
such an outcome.
8. TRADING FROM ONLY THE LONG SIDE
If you fail to learn how to utilize short trading
strategies, then you have cut yourself
out of a number of profitable trades,
experts say. Many people think that
shorting is un-American or too risky.
However, by not learning know how to go
short, you’re putting up a roadblock to one of
the potential trading avenues you have to earn
profits, particularly during a declining market.
The market is a two-way street, and the person
who doesn’t short is missing a part of the game.
One of the great things about the
VantagePoint predictive trading
software is that it finds trading
opportunities for both the long and the
short sides of every asset class. Newer
traders needs a technical system that allows
them to find two way trading opportunities.
9. FAILING TO LOOK AT THE BIG PICTURE
Many new traders don’t know how to incorporate
a multi-market or ‘intermarket’ approach into
their trading. They only look at a single stock
or asset class and fail to account for
the big macro picture. For new stock
traders, this often means only looking
at the equity in isolation and if they do
consider other markets, it’s the equity
indexes or other stocks in the same
sector.
But Louis Mendelsohn, the founder of
VantagePoint, recognized as early as the 1980s
that there are dynamic interconnections
between related global markets.
Still, new traders too often take the
historically narrow, single market focus
of analyzing each individual market
by itself, instead of incorporating it
into a broader, global, multi-market or
‘intermarket’ analytic framework.
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10 Common Mistakes New Traders Make

10. NOT HAVING A TECHNICAL EDGE
Most trading experts suggest that if you want
to trade successfully, you need an edge. What
do you know that will give you some degree of
conviction? Many new traders don’t
know the answer to this question, so
they really have no technical edge.
But newer traders don’t want their
technical tools to be too complex.
VantagePoint Predictive Trading Software
can give new traders that needed technical
edge. While extremely sophisticated under the
hood, from a user’s perspective VantagePoint
is incredibly easy to use, regardless of
whether you’re new to trading or
a highly experienced trader. All of
VantagePoint’s predictive forecasting
capabilities are completely built into
the software and ready for you to use.
It takes just a few minutes of your time
each evening to update the software
and pin-point trend changes and trading
opportunities before other traders even have a
clue about what’s about to happen.
Thanks for Reading!
10
new traders
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10 Common Mistakes New Traders Make