Alan Farley
Hint: Trade what you see, not what you think, and don't let the big picture ruin what's right in front of your nose.
7. Easy prey: You're so excited about a new play uncovered in your research that you can't wait to place a buy or sell order. Bad move, Charlie Brown. The first hour of the market day is often the worst time to enter new positions. They see you coming, sucker. Hint: Pick your trade entry price in advance and place deep limit orders that won't execute until the market moves in and takes them out. 8. Gadget dependency: We spend thousands of dollars on questionable software and chat rooms, hoping they'll fill in the black holes in our knowledge. The bottom line: Kilobytes and real-time calls can't overcome a lack of skills. Hint: Some professionals still draw their charts by hand. Why not save your money until you see the market the way they do? 9. Playing the lottery: Trading and gambling are different animals, but you'd hardly know it during earnings season and before big economic reports. How often do you carry a big position into earnings, hoping to get a pop from the news? Hmm, I thought so. Hint: Get out of all positions before earnings news because, in reality, you have no definable edge in holding them through the maelstrom. 10. Profitable illusion: A coveted position moves in your favor, making you feel like a genius and triggering an ugly wave of overtrading. But you've forgotten that the money isn't real until you actually put it into your pocket (see capital gain
).
Hint: Cut your monthly trade frequency in half. Then place stop losses on what's left and get away from your screen. If that makes you absolutely crazy, keep lowering your position size until it sounds like a great idea (see "Stop and Think Before Using Stop Losses").
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