The number of times I have heard "if you can trade in this market, you will be successful" is astounding to me at this point. Of course I started trading/learning stock options during one of the most volatile stretch's in recent history, but that doesn't excuse some of the mistakes that I make when I am trading.
At 4:01 PM EST on every trading day, when the stock market closes, I grab my iPad and go to this app that allows me to journal in it. I then sit there and reflect on the day of trading. What I did wrong, what I did right, evaluating why I made trades, asking myself why I made the decisions I made, and more times than not, I end up asking myself "Why the f*^k would you do that?"
Since the point of this site is to be 100% transparent and hopefully relate to people that are going through the same things that I am while going through this learning curve, I am putting myself completely out there about the mistakes I have made.
After a few months of trading under my belt now, these are the most common mistakes that I have made in my trading life so far:
Mistake #1 - Holding Onto Losers
When I confidently make a trade, and see that I am making money, I have ZERO PROBLEM closing that position for a win. But when I go down on a trade, without a stop loss, for some reason I always find a way to justify holding onto losing trade.
It's not like I don't see that I am losing money, or losing more and more money, but think to myself "Oh the stock will turn around" or "there has to be a reversal soon" or "it can't get much worse than this"... OH YES IT CAN.
ALWAYS SET A STOP LOSS
Mistake #2 - GREED
There is no better feeling in the world than getting into a trade confidently, and seeing everything play out as you thought it would.
Everyone wants that million dollar trade, the AMC or GameStop trade that will make you millions... but more times than not, it is not going to happen that way.
I can't tell you the number of times I have made a trade, see if make hundreds of dollars, and think to myself "let me just hold a little longer, it has to keep going". Then after a while, that premium goes down, that profit goes down, and you hope that it will go in your favor again, and instead of going positive for $400 you break even...
ALWAYS TAKE PROFITS
Mistake #3 - Not Learning How To Fish
As cliché as the saying is "give a man a fish, feed him for a day, teach a man to fish, feed him for a lifetime", it is very accurate.
When I first started trading, I joined a few discords and followed a few people on twitter that gave alerts about their trades. They would tell you what tickers, what contract, when to get in, when to get out, and you could just follow their plays to a T.
That is all good and dandy, but if you do not know why they are taking trades, or having your own confluence on trades, then you are missing out on becoming financially independent. Everyone's goal is to make consistent money, whether as a full time job, or a second or third or fourth income.
You need to come up with your own trading style, your own rules, your own playbook. You can learn from these call outs and alerts, but do not solely rely on them.
Mistake #4 - Not Following Your Rules
Every trader needs to have a game plan going into each trading day. The point of these rules are to make sure you stay within your own comfortable trading style.
Everyone wants to win the lottery, but more importantly, consistently winning will build your portfolio more efficiently and much faster.
Do not disobey your own rules, mine are these right now:
1) Set a hard stop loss at 20% for every trade
2) Do not take a trade if there is any hesitation
3) Have at least 3 pieces of confluence to execute a trade
4) Never buy a contract if you are not ok with losing that money
Mistake #5 - Chasing Trades
This right here as bit me in the a$$ so many times because 1) I get FOMO (fear of missing out), 2) I want to hit the lottery, and 3) trying to recover from losses.
Chasing trades is something that every trader does when they see a hot trade that people are posting on twitter about how they made $200,000 on a $100 trade. So of course I will take a trade without looking at anything else other than that one tweet or instagram post because I don't want to miss the next big run.
Forcing a trade when you are trying to recover from a loss to make up for it is one of the worst things you can do.
SOMETIMES THE BEST TRADE IS NO TRADE
What are your biggest mistakes that you have done or see others doing?
Join the Degen Day Traders Discord