On his blog, Chris Perruna lists a number of common mistakes to avoid while trading. Successful traders learn from their mistakes and capitalize from their experience using their next opportunity. With that in mind, here are a few of the trading mistakes that Chris highlights:

(1) Failure to cut losses: "Pride, ego, or stubbornness prevents the trader from selling." 

(2) Averaging down in price: "Placing good money after bad is a loser's game."

(3) Buying familiar names: "Yesterday's leaders are not likely to be tomorrow's stars. Look for solid new companies with great earnings, sales and a product in demand. Don't buy a stock based on a popular household name."

(4) Not knowing when to sell: "Determine your price objectives and risk-to-reward ratios prior to entering the trade; never allow emotions to make this decision."

By minimizing the size of your mistakes, you can maximize your chances for outperforming the market: "The secret to winning big in the market is not to be right all the time but to lose the least amount of money possible when you are wrong. As long as you win larger than you lose, you will become a consistent winner at the end of each year..." 

[image: Trading Academy]

Yes, unfortunately I'm familiar with all of those bad habits.

My biggest problem is #1.

My number 5 is trading too much.   Need to be much more selective in timing based on technicals.

But, I will continue to learn and get better.

JB

My biggest problem isn't knowing when to sell but when to buy. I don't know why but many times I have skewed from my own DD and technical analysis and leaned more on the side of probabilty. I guess that's considered having an emotional connection with the asset?

The fear of missing the boat is bad enough but when you combine that with a limit order you have to keep adjusting from a slowly drifting price you usually end up paying more than what your technical analysis called for.

Maybe I just need a trading partner to tell me when I'm getting too attached...

I'm going to have to disagree with #2.

Unless it is actually talking about averaging down on a stock that is a proven loser, i.e. AMD of late. I averaged down on AMD earlier last year after the initial drop from 20, and then cut my losses at around 13. So yes, that is a no-no.

But, if you find a stock that has good fundamentals, I see no reason why not to average down. My personal example: I bought JASO a month after it's IPO at around 18, over the next three weeks it went in a range between 16-24; I averaged down twice, both when it dropped below 17.  The result? JASO was either the #1 or #2 IPO in % performance last year. 

But, my biggest problem is not knowing when to sell. I've been working on it, by setting hard limits, that often times go soft when I start "thinking of the possibilities." :) 

i think to myself, ok, just who is this guy? I go to the blog and find that he owns another site called  market stock watch. i go to the site and the first thing that strikes me is a note that the site is closed for a "re-design" and the subscription payment gateway has been suspended (his gateway is PayPal btw) and this note is dated June 2007. I try the subscription link and it is still suspended. I also note that every winning stock on the left hand side has a price from 2 to 3 years ago. just my opinion but marketstockwatch.com "seems" dead. no signs of life at least 7 months. but my real reason for the reply is to say take what he says above with a grain of salt. i read those same "commandments of trading" alot these days. but in reality most of them are there, imo, to train a new breed of trader by people interested in selling systems of trading, or by brokers who would like to handle your account. i think the key here is to make some money and different people can accomplish that different ways. both of my parents were very successful investors, which by the way i differentiate from traders which may be part of my message, and by genetic miracle i'm now a duck floating in a lilly pond of gold due to their success. anywho, they bought on the way down, they allowed emotions, they hardly ever sold due to a drop cause most of their stocks paid good dividend yeilds, they amassed wealth by buying yesterdays leaders (most of whom continue to lead), they were the old fashioned buy and hold 90% of the time. Alot of what they did was contrary to what this guy is preaching and yet it worked very well. and Chris seems to have shut down his subscription service as of last June and now just blogs us his pearls of wisdom.

This is good information on trading mistakes.  No. 3 can be helpful when you lack information on new companies.  Most of my long term stock are familiar names but I do balance it with some that are not familiar along with international stock.  We cant leave out the global market.  Coca-Cola receives roughly 30% of their revenues from international sales.

Hi,

I agree with you, my big mistake in 2007 was greed. I lost my 1000% that I made in options. I was doing a very good job but at the end of the year I didn't close my positions at the right time and I lost it. I learned about options reading and searching on the internet. This mistake is not to stop me I know that I can do it again without greed. I'm trying to have my 1000% back. Have a nice weekend!