The Bumbling, Blundering Trader

Perhaps you think I could get the positions busted by pleading stupidity to my broker. But exchange rules dictate that all pre- or post-market trade entries within 10% of the closing price are valid and binding. So, the instantaneous loss was all mine, despite the bewildered look on my wife's face when I tried to explain to her what happened.

Company tickers can spell out cute visuals, like Harley-Davidson (HOG - commentary - Cramer's Take) or Cheesecake Factory (CAKE - commentary - Cramer's Take). But keeping track of the company names behind the tickers can be a boring chore for traders and trigger all kinds of ownership errors. I should know because I've bought or sold short the wrong stock over a dozen times in the last few years.

For example, I had major trouble reading the subtle difference between Alaska Air (ALK - commentary - Cramer's Take) and Alkermes (ALKS - commentary - Cramer's Take), substituting one stock for the other several times. Now, do I immediately jump back to the sidelines when I accidentally buy the wrong stock? Never, because I suffer from a trading affliction called "belief in divine intervention."

I carry around the common but unfortunate opinion that everything happens for a reason. So when I buy the wrong stock, there's an immediate assumption the great trader in the sky must be pointing out a supernatural profit opportunity. It's something akin to picking a stock by having a monkey throw a dart at a dartboard.

So I'll sit there and try to squeeze every last dime out of my faux pas position rather than admit the mistake and hit the exit button. Despite the out-of-body experience, I'm forced to admit I've never made a fortune with a stock I never wanted to own. But I'm going to keep on trying until it happens.

Then there's the extra digit error. This trading cramp can cost tons of money and even trigger nasty phone calls from your broker. It happens when you want to buy or sell 1,000 or 5,000 shares of stock, but add too many zeros to the order. The mental mistake can be especially damaging with four times margin power in place on many trading accounts.

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At the time of publication, Farley held no positions in the stocks mentioned, although holdings can change at any time.

Alan Farley is a professional trader and author of The Master Swing Trader. Farley also runs a Web site called HardRightEdge.com, an online resource for trading education, technical analysis and short-term investment strategies. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Farley appreciates your feedback; click here to send him an email. Also, click here to sign up for Farley's premium subscription product The Daily Swing Trade brought to you exclusively by TheStreet.com.

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