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Five Trading Mistakes Traders Make, How to Avoid them?

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Mistakes are not a failure. It’s a learning tool.

Mistakes help if you view them as wisdom to gain a deeper understanding of facts.

Trading is not an error-free business. Mistakes are common here as well.

Every trader makes mistakes and learns from mistakes to become a successful trader.

Why Do Trading Mistakes Happen; How Can You Avoid Them?

Mistakes happen when you lose something that means a lot to you.

Emotions lead to wrong decisions. It’s easy to stay detached if the cash you are trading with means nothing to you.

The problem arises when the same trading capital becomes precious to pay a loan or EMI, a card bill, or a kid’s schooling fund, and then it turns risky.

You get nervous, stressed, and emotional, and then wrong decisions hit — a trading mistake.

The scene becomes tough. You can’t lose or book a loss & lose money to leave the trade.

Trade with cash you can afford to lose. That will cause fewer mistakes.

Trading With NO Education

You don’t jump straight into the water to swim, Right?

First, you learn to practice and then swim. No one knows swimming by birth. It’s a learnable skill.

Trading is a skill game. You can learn it by investing time and money.

Many traders see trading as playing video games. Such traders count trading as a Buy/Sell button game. The horrible trading mistake.

Sad, but that’s NOT how Profitable trading works.

A sincere trader understands pushing the Buy/Sell button is not trading.

Successful traders always work on gaining skills to reduce the risk.

They stay in the learning cycle to increase their skill and earn more wealth.

Sincere traders know that knowledge is power—the more they learn, the more they earn.

You can learn yourself if you don’t want to invest money. Self-learning has its pros & cons.

Enhance your trading knowledge by reading books to learn how financial markets work.

The study needs time & devotion, and effort pays dividends.

Not Keeping Patience

One reward reaping skill you can practice daily. That skill is patience.

Patience is a learnable skill, and you must own it to become a profitable trader.

Patience is a must for waiting for your best setup to give a Buy/Sell signal, and sometimes for the trade outcome.

A lack of patience gives birth to a trading mistake.

The impatience further leads your mind to close a winning trade quicker.

Four ways to be the patient you never thought you could be.

  • Practice waiting. Psychological analyses show in the long run, waiting makes us happier. You will gain more patience as you practice waiting.
  • Stop Unimportant Tasks. Reduce stress and avoid tasks that hold time away from vital points. List tasks that aren’t important and remove them from your schedule.
  • Aware of the Tasks Making You Impatient. Multi-tasking gives birth to frustration one understands late that he or she isn’t making any progress. Write what makes you impatient; such exercise will help you focus on one task at a time & remove the chore that stresses you.
  • Take a Deep Breath. Slow breathing calms your mind, and reduces impatient feelings. Develops patience and commit yourself not to repeat such trading mistakes.

Trading Without Plan

Masses plan a holiday, wedding ceremony, retirement, etc.

But they don’t plan a trade or trade the plan they develop—a decisive trading mistake.

Few traders create a plan but don’t follow it. Because, during trading things, they can outsmart the market by adding logic.

Like “Market is scoring higher, but my stock fails, I better get out.” or “The Stock has moved enough on the upside; I don’t think it will go higher.” Or “Stop loss reach, but the stock is in the oversold range; I’ll wait for the bounce.”

The trading plan acts as a guidebook that informs you what action you need to take under a precise trade.

Your trade plan covers your Entry, Exit, Stop loss rules, etc.; you must write your trade plan before you trade. While trading, your trade plan must be in sync with your mind to manage emotions.

Your trading plan may not work every time; still, follow your plan with discipline.

Ignoring Stop-loss Orders

A trading mistake novice to pro traders does.

Stop loss is the biggest secret of profitable trading.

Stop loss is your trading capital’s insurance. Your stop-hitting trades are the small premium of your capital’s insurance.

Several traders think their trade will stop if they will place the stop loss. That’s baseless and a trading mistake.

Three reasons why it’s important to use stop loss in trading.

  • Stop loss, protect your trading capital, to let you trade another day.
  • Stop loss reduces your loss and maximizes your profits.
  • Your Stop loss saves blowing off your entire account for one wrong trade.

Your emotions will tamper you to hold losses if you don’t get out soon enough. Following your stop-loss rule with control is the best solution during such a conflict.

Never place a tight stop loss. Allow your trades to breathe. Too close stop loss may cause a whipsaw.


Over-trading is a silent trading mistake. Traders never understand how they made this mistake.

Overtrading means excess trading. Such trading mistake happens because traders don’t stick to their trading plans and don’t know when to stop trading.

Overtrading turns into revenge, trading emotions as well—a two-way sword.

After a series of losses, you look to recover loss fast. During such time you pick up high-risk trades, and over-trading turns into revenge, trading emotions.

Following the trading plan is the best way to avoid over-trading mistakes or fix the Profit/Loss limit for every week or month.

Finally, an amount that you can afford to lose in a week.

Break down the amount into five (number of trading days in a week) for the daily loss limit; suppose your weekly loss limit is 10,000 INR.

10,000/5 trading days = 2000 Rs is your daily loss limit.

Now from Monday-Wednesday, your trades result in a 10,000 INR loss. Then you will avoid trading for the rest week.

Count the weekly profit limit in the same way, and as you earn, such amounts avoid trading for the rest week.


Stop looking for get-rich-quick schemes. They don’t work.

Real learning doesn’t happen on the couch.

It happens when you get out, ask questions, and make mistakes. And that’s your holy grail trading system- a collection of your trading mistakes.

Learning from mistakes separates the winners from losers.

Profitable traders make mistakes and learn from them. And don’t repeat the same mistake to lose money.

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About the Author

Divesh Jotwani is a Full-time trader in the Indian stock market. He has spent over 20+ years researching and discovering WD Gann's methods and applying them day in and out markets.