The Best Time To Learn From Mistakes

The best time to learn from mistakes is when someone else has made them.

So, I've made a list of some of the most common trading mistakes that are made. Even I've made some of these. If you have already made some of the mistakes, you can rest assured that you aren't alone in making them.
If you haven't made them, then here's a way to get around having to learn by making the mistakes yourself.
The first, and worst mistake that people make is that they believe trading is the easy answer, a way to get rich quickly.
They will often expect to become wizards in the market overnight, but they fail to realize that trading is like any profession;
you must learn how to do it first.
For example, would you attend a weekend doctor's seminar and expect to conduct heart surgery on Monday?
Of course not!

I am shocked at what people expect when they go to a weekend trading seminar. They think they will create wealth without having to work, invest or think, and it just doesn't happen that way.After treating trading as if it were a get rich quick scheme, the next most common mistake is to approach the market without a plan. Without a trading plan, traders approach the market in an inconsistent manner.

One day they trade stocks and the next they trade the foreign exchange. Or they may use one set of indicators one day, and the next day they will throw these indicators out the window and take on a completely new set. Without a consistent approach the only thing governing their trading decisions is really emotions, and that will doom them to failure.

If a new trader has managed to skip these last two mistakes, they often fall down when they try to go it alone. All traders should find themselves a coach, or a mentor. Someone who can help them spot the errors in their system that they might not have noticed.

An outside point of view can help you avoid other costly mistakes, and greatly increase your profits.These are some common and quite basic mistakes. These next errors I'll mention are ones that are just as prevalent in the trading industry, but they often occur once traders have been around for a while. I have some personal experience with these mistakes. Let's call them the three most expensive mistakes I've made.

The first mistake I made was to search for the “Holy Grail” of trading. This was an incredible waste of both time and money. During the first three years of my trading career I spent over $25,677 on a library full of books, videos and seminars as well as spending thousands of hours in search of the perfect trading methods. Honestly, 95% of what I bought was pure junk… I should have listened to my mentor earlier and realized the “Holy Grail” of trading is simply excellent money management!The second most expensive mistake I made was not having a predefined exit point. Early in my trading career I remember trading a stock I thought had a high percentage chance of rising. I was too confident.

I fully leveraged the position. Unfortunately, when things did not go as planned, I did not know when to exit, and was paralysed. I kept rationalizing why I should hold onto that stock. As the stock continued to fall, I made more and more excuses. At the very end I remember thinking “I can't take it anymore”, and sold out. That, of course, was the point the stock turned.I learned two very valuable lessons that day. First, always have your exit points predefined. Second, big losses once started out as small losses, and it is much easier to take a small loss than a big one.

The last mistake is not one that took money out of my pocket, instead it was a mistake that made me leave money on the table. In fact, this was a reoccurring mistake that cost me big.Early on, I remember selling positions as soon as they showed a profit. I would not let my profits run, as I was too afraid to give the money back to the market. I figured the profit as mine. The result was that I ended up selling the stocks that were making me money.It wasn't until my mentor explained to me that when you are trading, and showing a profit, that is the point where you should be adding to the position, not closing it out, that I began to understand what I was doing.

Once I started following his advice, my trading profits soared.Trading is not an easy profession, but it is one that can give you great rewards. Avoid these common errors, create a simple, well-designed trading system, and learn your market. If you take the time to study the market, and learn from other's mistakes as well as your own, you will become a successful trader.