New Year's Resolution: Avoid Traders' Top 10 Mistakes

New Year's Resolution: Become a more profitable trader.

Easier said than done.

Achieving sustained success in trading requires avoiding numerous pitfalls as much as it does seeking out and executing winning trades. In fact, most professional traders will tell you that it's not any specific trading methodologies that make them successful but rather the overall rules to which they adhere that keep them "in the game" long enough to achieve success.

Following are 10 of the more prevalent mistakes I believe traders make in trading stocks and other markets. This list is in no particular order of importance.

1. Failure to have a trading plan in place before a trade is executed. Without a specific plan, a trader does not know, among other things, when or where he will exit the trade or how much money may be made or lost. Traders with no predetermined trading plan are flying by the seat of their pants, and that's usually a recipe for a "crash and burn."

2. Inadequate trading assets or improper money management. It does not take a fortune to trade the stock or futures markets successfully. Traders with less than $10,000 in their trading accounts can and do trade successfully. And traders with $50,000 or more in their trading accounts can and do lose it all in a heartbeat. Part of trading success boils down to proper money management and not gunning for those high-risk "home-run" type trades that involve too much capital at one time.

3. Expectations that are too high, too soon. Beginning traders who expect to quit their "day jobs" and make a good living trading in their first few years are usually disappointed. You don't become a successful doctor or lawyer or business owner in the first couple of years of the practice. It takes hard work and perseverance to achieve success in any field of endeavor -- and trading is no different. Trading markets is not the easy, "get-rich-quick" scheme that a few unsavory characters make it out to be.

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Jim Wyckoff is a senior market analyst for TradingEducation.com a free educational Web site. In addition, Wyckoff writes a blog offering current market commentaries every morning on TraderBlog.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Wyckoff appreciates your feedback; click here to send him an email.