20 Most Common Trading Mistakes E-Book

Kel Butcher

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 326

Veröffentlichungsjahr: 2012

Beschreibung

You're a trader. You live a life of glamour, fast cars, leisure and luxury -- everything you've ever dreamed of ... Of course, that's until you discover that trading can be brutally difficult. If you play the trading game, you are going to make mistakes -- maybe even some like these: * agonising endlessly over when to enter or exit a trade * trading like a maverick, risking too much of your capital * beating yourself up when a trade goes against you * losing $1 million in a single trade * clicking 'buy' instead of 'sell' * buying 10 000 units when you only meant to purchase 1000. 20 Most Common Trading Mistakes reveals market mishaps from some of the biggest names in trading. Everyone - from stellar traders to complete novices -- can use help learning how to trade in the black. Why not learn from the masters how to turn blunders into profit?

Leseprobe

Contents

Acknowledgements

Introduction

It’s not my fault — I didn’t even know it was a mistake!

A great pick-up line

How much did that cost?

Analyse to understand

Oops, sorry, my mistake

Prevention is better than cure

First time it’s a mistake, second time it’s my fault, third time I’m an idiot

Avoiding the blame game

The horse goes in front of the cart

Building from the ground up

Teaching the old dogs new tricks

Patience is a virtue

Choosing the shoe that fits

Reality check required

Failing to plan is planning to fail

Write it down

Only fools have no rules

Transfer the funds to my account, please

Do it now

It’s evolutionary, baby

Get that monkey off my back

Somebody else must know more than me!z

Three schooners and 1000 BHP shares, thanks mate

Suffocated in a strangle

Ah, sorry mate, you know that share tip? Well...

Quiet please, the movie is starting

Nice knowing me

So you think you can ... sing?

Developing your skills

Simulation versus fantasy

Add in a healthy dose of realism

Cheering for the team

Looking in the mirror

Aligning the planets

Easy come, easy go

I’m not slow, I’m a turtle!

KISS this

Enter at your own risk

Running away from your ego

Making the shift

Complex complexity

Analysed but paralysed

Keeping it simple

Trader development

Too many contracts, not enough shares

One head, two hats

It’s simple, but it ain’t sexy!

Thinking beyond the obvious

Position sizing

Decisions, decisions and more decisions

1000 per cent return in three days — sure, it happens all the time

Learning to play the piano

A reality check

Doing what it takes

Sorting the wheat from the chaff

Heads, I win; tails, you lose!

You loser!

So, you’re expecting...

Crunching the numbers

Sample size

The past ain’t the future ... (yet)

What’s your edge?

Creating certainty in an uncertain environment

Keep it real

Bet big to lose big

Margin or leverage—what’s the big deal?

Ramp it up...

... and smack me down

A double-edged sword

Share trading on margin (margin loans)

Predicting the market top

What’s the time, Mr Wolf?

What’s your time frame?

Long and short beans

Don’t burn the cake

Money and time

Clarity is king

Where the ^!*# is the exit?

Trying to out-think the market

Getting trampled by cattle

Mental stops for mental cases

I just wanna get it right!

Shooting for a target

The trader and the shoe salesman

Getting greedy for coffee

Using a trailing stop

The eternal optimist

Why trade with exit rules?

The magic ingredient?

But the guy on TV said it would go up tomorrow!

It must be right — I saw it on TV

Hey, it’s not my fault, I only drank 10 beers!

Practising and practising the violin

A good tradesman never blames his tools

Half price and still too expensive

The chasm of despair

Riding the trend

If you want my advice...

Take the money ... and wait

An emotional train wreck

Learn and prosper

I’m right! The market’s wrong

It’s not only about the money

One day at a time

Ego is a dirty word

When the rubber hits the road

Mindfulness

Watching you, watching who?

Adopting a disciplined approach

The emotions of a robot

Consistently inconsistent

Underperformance

Do you see what I see?

Picking fruit

Managing the system

Understanding drawdowns

A trader’s mindset

What colour is your box?

Overworked and underpaid

Too much or not too much — is that the question?

Errors, instability and dirty laundry

A line in the sand

Who are you?

Getting it right

Fat fingers, 10 000 too many, and busting trades

Who fears the executioner?

Redefining the role of the broker

Oh, #@%&! I pressed the wrong button!

Common trading errors

Avoid the grief

I’m sure I filed that somewhere ...

Trader or investor

Don’t be an ostrich

Spreadsheets and computer programs

Online record keeping

Backing up

Pay a bookkeeper

Defining your activities — an Australian perspective

Shoes in a shoebox, records on a spreadsheet

Glossary

Index

First published 2009 by Wrightbooks

an imprint of John Wiley & Sons Australia, Ltd

42 McDougall Street, Milton Qld 4064

Office also in Melbourne

Typeset in Berkeley LT 11.3/14pt

© Kel Butcher 2009

The moral rights of the author have been asserted

Reprinted in 2011

National Library of Australia Cataloguing-in-Publication entry:

Author: Butcher, Kel.

Title: 20 most common trading mistakes: and how you can avoid them/Kel Butcher.

ISBN 9781742169293 (pbk.)

Notes: Includes index.

Subjects: Investments.

Stock exchanges.

Investment analysis.

Dewey Number: 332.02401

All rights reserved. Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission. All enquiries should be made to the publisher at the address above.

Cover image: © aispl, 2009. Used under license from Shutterstock.com.

Figures on pages 118–120: Microsoft Excel screen shot(s) reprinted with permission from Microsoft Corporation.

Disclaimer

The material in this publication is of the nature of general comment only, and does not represent professional advice. It is not intended to provide specific guidance for particular circumstances and it should not be relied on as the basis for any decision to take action or not take action on any matter which it covers. Readers should obtain professional advice where appropriate, before making any such decision. To the maximum extent permitted by law, the author and publisher disclaim all responsibility and liability to any person, arising directly or indirectly from any person taking or not taking action based upon the information in this publication.

There are no mistakes. The events we bring upon ourselves, no matter how unpleasant, are necessary in order to learn what we need to learn; whatever steps we take, they’re necessary to reach the places we’ve chosen to go.

Richard Bach

Mistakes are the only universal form of originality.

Mason Cooley

Acknowledgements

Writing this book would not have been possible without the involvement of the 18 interviewees. Each of them gave freely of their time among their own busy schedules to ensure deadlines were met and editors kept happy. My utmost thanks go to them for their open, honest and often candid responses to the questions that were posed to them. I would also like to thank them for their ongoing contribution to the education of other traders throughout the world. I am honoured that each of them has willingly contributed to this book.

As always, I am grateful to, and inspired by, the many other traders and students of the markets I have met over the years who have encouraged and supported me in my journey.

Kristen Hammond and the staff at John Wiley & Sons have once again been pivotal, encouraging and supportive as a vague idea of ‘yet another trading book’ crystallised into the book you are now reading.

My wife Cate and sons Jesse and Ollie provide the balance, support and love that makes it all worthwhile!

Carpe Punctum

Introduction

This is a book about trading mistakes. It is not, however, a negative book. Each mistake is followed with the information and steps you can take to ensure these mistakes need not happen to you. The mistakes discussed within the pages of this book are the more common mistakes made by traders in general, the world over, regardless of the markets they trade. They apply to stock market traders, foreign exchange traders, traders using tic charts to scalp the equity indexes, traders using long-term breakout systems to trade futures or stocks, and everything else in between.

While the title refers to 20 mistakes, there are actually far more than that covered within the examples and experiences shared by the interviewees. I encourage you to read and study the contents of each chapter carefully and look out for the hidden gems. Often the remedies for the varying mistakes are similar — one remedy might cure a number of ills.

Trading is a wonderful business for those prepared to take the time to learn about themselves and the markets and to do the hard work necessary to become consistently successful. Disciplined, patient and consistent traders will be well rewarded for the time and effort they put in. Those who lack discipline and patience will suffer at the hands of the master of fear and the mistress of greed. They will bounce around from one idea to the next, one broker to the next and one system to the next with no clear plan in place for what they are doing and what they hope to achieve. Eventually they will dwindle away their trading accounts to zero, or stop trading altogether through frustration and stress.

Too often impending traders are sold the dream that trading is easy, and that once you have mastered a few basic skills you can lie on a beach on a deserted tropical island and watch the cash roll into your bank account in a protected tax haven. Nothing could be further from the truth. As with any profession or business, trading requires learning and skill development, a plan and lots of ‘blood, sweat and tears’ before it becomes rewarding. Despite the media hype, no-one is an ‘overnight’ success in trading—or any other venture in life, for that matter. Many of the traders interviewed in this book struggled for years before becoming an ‘overnight’ sensation or whiz kid. They were then able to build on these experiences and what they had learned from the markets to become well recognised for their trading prowess.

All of the interviewees will openly admit that they never stop learning—and neither should you. The markets will continue to change and evolve in the years ahead as new products are made available and technology continues to advance and change the way we trade. As traders we need to constantly evolve, learn and grow with these changes. Through education, awareness and studying the results and experiences of those who have gone before us, we can continue to actively participate in these markets without necessarily having to reinvent the wheel.

Regardless of your level of skill or knowledge you will learn from the experiences shared by the traders and market professionals who have contributed their time and knowledge to this book. Be it the simple necessity to always trade with a predetermined stop-loss, the personal issues of how to manage your own biases and psychology, or more complex issues concerning money management and risk management models, the examples and testimonials of these market professionals are enlightening and encouraging. Many have been happy to openly share personal examples of the mistakes they have made and how they have learned from these mistakes. This honesty and acceptance is what makes them all true professionals in their field.

If you aspire to consistent, rewarding and profitable trading you will gain much from reading the stories shared within.

Trade well.

Kel Butcher

MacMasters Beach, NSW, Australia

April 2009

It’s not my fault — I didn’t even know it was a mistake!

Mistake 1: defining a trading mistake

The greatest mistake you can make in life is to be continually fearing you will make one.

Elbert Hubbard, The Note Book, 1927

My guess is that most of you are probably inquisitive as to what constitutes a trading mistake. Given that this is a book about trading mistakes and how to avoid them, it seems only logical that the first chapter needs to define what mistakes are, and highlight some of the many mistakes that are discussed in the following pages.

Trading mistakes inevitably stem from two main sources: believing that trading is easy; and not having a well-defined plan for engaging the market. Invariably, all mistakes that traders make emanate from these two things. Much of this chapter is from an interview with leading market educator and world-renowned trading coach Dr Van Tharp, whose comments appear in bold throughout this chapter. He offers the following definition of a trading mistake: