The daily objective of a day trader is to avoid mistakes. In order to avoid making mistakes there are two pre-requisites to understand.
The first is that one needs to have a firm understanding of his own trading philosophy, ideology and methodology.
The second is that the individual needs to know what trading mistakes are and and why they happen. The basic theory of trading mistakes and some of the reasons people make them are contained in ealier blog entries.
For convenience I have listed all the trading mistakes in order of importance (Meaning that the higher that they're ranked here the more money these mistakes are costing you over the long term)
Missed Opportunities- Any chance to place a high quality/high probability trade which was identified in time to take advantage of the market move. These will cost any trader the most amount of money depending on how often the miss opportunities. The most common reason for this is an insufficient understanding of his strategy and the game of trading
Missed Holding Opportunities- This is defined as an opportunity to hold a winning trade and not holding it. Either because your trailing stoploss was too tight or closed prematurely
Not securing profits- The purpose of a trailing stoploss is to secure profits. When an individual doesn't use his stoplosses appropriately or effectively, He becomes the subject/effect of the randomity of the markets. Yes trailing stoplosses aren't perfect but if an individual never secures his profits He will never have profits. Using trailing stoplosses is a skill which the individual needs to refine and this skill should become better as an individuals trading rationale improves and his market analysis improves as well
Re-Entry Trades- This is defined as a trade placed after a winning or losing trade on the same asset and same trading day. When an individual is trading compulsively I have seen these types of trades wipe out 110% of profits.
Stupid trades- Trades placed compulsively, Typically having too tight an initial stop-loss or where the trader himself lacks commitment to let the trade run and therefore closes it prematurely (Typically in order to place a re-entry trade)
Over-Risked Positions- Trades where a trader allocates more risk per trade than they typically allot themselves (This is typically done compulsively and as re-entry trades but this is not always the case)
The first three mistakes are trading rationale mistakes, These are related to an individuals ability to analyse the market and make the right decisions when trading. The last 3 mistakes are also trading rationale mistakes but in standard retail trading philosophy most trades would refer to these as flaws in an individuals trading psychology.
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