Articles, Blog

Common Mistakes New Traders Make (2019)

August 17, 2019

– So you’ll hear a lot of
talk about trading rules and what you should do. Today’s video, I’m gonna kind of take a little bit of a different approach, and talk about things you shouldn’t do and why it’s so important. (energetic rock music) Hey, everyone. Lead trainer with
StocksToTrade Tim Bohen here. Be sure to subscribe
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participate in the Q&A, and really engage. So, as I mentioned in the beginning, we’re gonna talk about
things you shouldn’t do. I’ve got five rules you
should always follow and they really often trip up traders. Number one is not learning the market. What do I mean by that? You got to have seat time, okay? We talk about that, I think that’s kind of a
flight simulator-type idea. Before they let you
fly a commercial plane, you got to be in the simulator, you got to put in that seat time. Kind of a meathead, I like
to call it putting in reps. Again, or if you’re a runner, I hope you wouldn’t go
run a marathon tomorrow unless you ran a mile, ran
two miles, ran five miles. Put in a few months, then
you take on that marathon. And one of the things I
think a lot of people do is they just jump in. You can start literally today. If you’ve got a laptop, a wifi connection, and a couple hundred bucks, no one will stop you from trading today. You could have a brokerage
account, wire them money, and in 20 minutes from now, make a trade. I think that’s one of
the worst things to do. Put in that time, paper
trade, trade small. A lot of times on the SteadyTrade podcast, we talk about a lot of
these newer traders. And a lot of the most
successful newer traders, they spend six months, a year, two years, even paper trading, never
even putting in that trade. So the biggest thing, don’t just jump in. Watch the market, learn it, review, and put in that seat time. The second thing I think
a lot of traders make is not using technology, particularly, the best technology. Obviously, I’m a little bit biased. I think StocksToTrade is one of the best stock trading platforms out there. It’s cosmetically awesome,
I love the way it looks, it’s easy to use, we’ve
got pre-built scanners that get you up to speed immediately to find the most volatile stocks, or even find swing trades and investments. We’ve got Oracle, a great
algorithmic-based tool that lets you build a watch-list of the most volatile
stocks with one click. So I always say, I joke, well, I don’t really joke, I meant it. We live in the greatest time in history. I mean every year is better. Research Steven Pinker. I believe a lot of his work is true. Every day gets better, we
all this amazing technology. Smart phones, super high-powered laptops, software like StocksToTrade. Take advantage of the
technology to empower you to grow your account. Third thing I see so many traders do that you should never do
is writing a trading plan. I mean, if you watch these
videos, and I appreciate it, you’ll hear me harp, harp, harp,
about write down your plan. What is your stop-loss? What is your goal? Why are you trading this stock? Entries, exits, spots on the chart, support and resistance levels, all these things we talk
about, you need to do that. Now, what I see a lot of newer traders do that take those big loses, they go from A, having no plan, being unable to write a trade plan, to that intermediate
level where they’re like “Okay, I’m gonna commit to this. “I’m gonna buy it a buck 50, “I’m gonna stop out at a buck 25, “my goal is 2.25,” then all of a sudden,
the stock’s at a dollar, it’s at 90 cents and they’re still in it. You need to move into the
third phase of to trade plan and actually follow it. That does two things. Number one, it preserves your capital. If you’re a new trader, one of the biggest, most
important things you need to do is stay in the game. Preserve your capital. The other thing that
really trips people up when they don’t follow the trade, screws you up mentally. It really, really, messes with your head. Because now you’re staring at a big loss and you go into that self-hating mode. I’ve been there many times. You’re like, “You’re an idiot. “You said you’d stop out here. “You’re still in this.” So now, you’re staring at a bigger loss, you’re messed up mentally. What are you gonna do when
the next trade comes along, or what are you gonna do next day? I’m telling you, one of the most, nobody wants to take a loss, I get it. But it’s part of trading. But one of the most refreshing feelings is when you plan something
out, it doesn’t work, and you stop out where you said you would. I mean, you’re losing money at that point, your taking that loss,
but it feels really good to stick to your plan. So don’t break that. If you’re making plans, if
you’re putting those stops, if you’re putting those goals
in, don’t get greedy either. Stick to your plan, and
it will help your psyche and help your account. Fourth one, and I’m gonna keep it quick, keep it quick because it
is such a simple thing. Please don’t let your stop-losses run. Please don’t take a bigger
loss than you said you would. If you’ve got a small account and you said “I’m gonna lose $100 on this
trade,” stop out at $100. ‘Cause remember, if those losses grow, you got to make double just
to get back to where you were. If you were gonna lose
100, and you lose 200, now you got to make 200 just
to get back to break even. Please, it’s the most critical thing. Cut those loses early. The fifth thing I see
so many traders doing is risking too much. We see this a lot,
particularly on the short side. I see so many newer
traders that get enamored with short-selling these high-flyers. And I actually posted a meme
to my Twitter the other day. I mean, it’s this funny meme of this kid making all these faces in a progression. He’s down 500, then he’s down 50, and then he makes $10,
and he’s celebrating. That is not trading. That is not risk management. If you’re risking $500,
you take a $500 draw-down, and then you make $10, you will not be successful over time. You profited. You may be like “Well, Tim,
I made $10 on this trade.” But if you’re risking 500 to make 10, you will not be successful over time. You will blow up. Have proper risk management. If you look at this trade and you think, “Okay, I’m hoping to make 100,” then you never want to risk
more than three to one ratio. If your goal is to make
$100 on this day trade, in and out in 10 minutes, whatever it is, you should be risking
$33 with commissions. That’s a tight stop-loss. But as you grow, maybe
you’re risking 1,000. Now you’re risking 300. Focus on that three to one risk to reward, and don’t take those terrible draw-downs. It’s not going to work over time. Thanks again, everyone. What I would like to
know in the comments is have you broke these rules? Give me a comment below. Do you break these? Are you still breaking these rules? I mean, hey, something about trading is nobody’s ever perfect. We make mistakes over
and over and over again, but we focus on minimizing those mistakes. Thanks for watching our video. Be sure to comment below with
any trading-related question. We love answering your questions. Also, like and share with your friends, and be sure to subscribe to be notified as soon as our next video hits. And if you’re looking to
expand your trading knowledge, don’t forget to check out
all of our other videos. And be sure to click the trial below. Check out StocksToTrade. I think it is one of the best, most rapidly advancing
softwares out there. Be sure to check out our trial. (bouncy country music)

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  • Reply StocksToTrade August 16, 2019 at 3:01 pm

    Do you break these rules?

  • Reply eli Alvarez August 16, 2019 at 3:07 pm

    Been trading part time since March and because of this great week I’m in the green . STT is great . All these videos help a lot . Being more conservative and locking up profits helped me learn from my early mistakes

  • Reply Laurie Staton August 16, 2019 at 3:12 pm

    Needing to get a new laptop so I can join STT what would you suggest like how many GB would I need to run it? TIA

  • Reply Red CrossWire August 16, 2019 at 3:57 pm

    good video?

  • Reply kevino savino August 16, 2019 at 3:59 pm

    so true!!! most people don't follow a plan and they gamble and make traders look bad

  • Reply James Scott August 16, 2019 at 4:12 pm

    I don't always break a rule. But, when I do I almost always lose. Insert Dos equis guy lol

  • Reply Faulk Smash August 16, 2019 at 5:53 pm

    Love these refresher videos. Putting "2019" in the title makes it feel new, which is always good lol.

  • Reply BlestOutWest August 16, 2019 at 6:13 pm

    Thanks Tim! Great reminders. Helps alot

  • Reply freedom songs August 16, 2019 at 11:18 pm

    You cannot log in to stt if you dont have an apple laptop, you be sorry

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