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

4. Failure to use protective stops. Using protective buy or sell stops upon entering a trade provide a trader with a good idea of how much money he or she is risking on that particular trade, should it turn out to be a loser. Protective stops are a good money-management tool, but they're not perfect. There are no perfect money-management tools in futures trading.

5. Lack of "patience" and "discipline." While these two virtues are overworked and very often mentioned when determining what unsuccessful traders lack, not many will argue with their merits. Indeed: Don't trade just for the sake of trading or just because you haven't traded for a while. Let those very good trading "setups" come to you, and then act upon them in a prudent way. The market will do what the market wants to do -- and nobody can force the market's hand.

6. Trading against the trend -- or trying to pick tops and bottoms in markets. It's human nature to want to buy low and sell high (or sell high and buy low for short-side traders). Unfortunately, that's not a proven means of making profits in futures trading. Top-pickers and bottom-pickers are usually trading against the trend, which is a major mistake.

7. Letting losing positions ride too long. Most successful traders will not sit on a losing position for very long. They'll set a tight protective stop, and if it's hit, they'll take their losses (usually minimal), then move on to the next potential setup. Traders who sit on a losing trade "hoping" the market will soon turn in their favor are usually doomed.

8. "Overtrading." Trading too many markets at one time is a mistake -- especially if you are racking up losses. If losses are piling up, it's time to cut back on trading, even though the temptation is to make more trades to recover the recently lost assets. It takes keen focus and concentration to be a successful futures trader. Having "too many irons in the fire" at one time is a mistake.

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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.