Avoid These Trading Mistakes

Short-term trading can be lucrative and personally rewarding, but it can be costly and emotionally taxing if you make common mistakes.

I know first hand what it’s like to blow up a trading account.

In the late 1980’s I felt on top of the world as I was learning about and trading short-term options.

Then, Black Monday hit in October, 1987.

Needless to say, I had to take some real time off to recover, contemplate my future in option trading and to learn more.

Short-term traders commonly make three mistakes.

  • Going it alone instead of enlisting help from experienced traders
  • Trading without rules, and
  • Letting emotions dictate trading decisions

Each of these mistakes can be costly, but they’re also avoidable.

Don’t Do It Alone

Although I knew a lot about option trading strategies, I didn’t know what I didn’t know – if you know what I mean.

That’s why I got a mentor. Not only was George Fontanills a great mentor for me, but I was able to work with him and create Optionetics – the world’s biggest option education company at the time.

Now I’m the mentor to thousands of traders.

Trade Systematically

One of the most important things a short-term trader can do is have a start-to-finish trading plan.

All short-term traders should be able to answer the following questions – before entering any trade:

  • Why am I entering the trade?
  • What is my potential for reward?
  • What is my potential for risk?
  • What is my exit strategy?

These four questions above may not be an all-inclusive trading plan, but they are the critical to every trade.

Using technical analysis tools and other repeatable processes is also very important.

Be a Mechanical Trader, Not an Emotional Trader

There are traders who will sell covered calls against stock shares they own in their portfolios, but only when the stock’s price has fallen below a 20-day moving average line.

A mechanical trader seeks to follow a set of rules that can be repeated trade after trade.

It’s called rules-based trading.

In the example mentioned, when a trader sees a stock fall below its 20-day moving average line, a covered call is taken. If the stock’s price rises above the 20-day the trader simply passes on the trade.

The trader is simply following the rules of “If this, then that.” Simply put, the trader is not basing the decision on whether he or she thinks the trade is good, but rather, taking the trade when specific conditions are met.

This is what differentiates a systematic, mechanical trader from an emotional trader.

The benefits of being a rules-based trader is that when something goes wrong on a trade, it can pay off later simply by following the process over and over.

Success Through Rules-Based Trading

My success has come by learning about the mistakes traders make and then taking action by not repeating those mistakes. I relied on the knowledgeable mentors, along with my own hard work at understanding complex topics.

I will always appreciate the mentors I’ve had in life, which is why I’ll say it again – Don’t do it alone!

By having mentors, I was prompted to apply rules-based trading in my option trading.

Now, trading with emotions is just a distant memory. It’s important to acknowledge and accept that losses will occur. When they do, it’s simply time to move on to the next trade – stick to your plan.

Once they’ve been pointed out to you, avoiding the mistakes short-term traders make is much easier.

I succeeded in trading based off rules and not emotions, and so can you!

See you soon,

Tom Gentile
America’s #1 Pattern Trader

11 Responses to “Avoid These Trading Mistakes”

  1. antonio clemmons

    Appreciate that have always been a mentor in other areas of my life but have never had a financial person I could go to being the older of my siblings they all looked to me our father didn’t get much education as his father died early an THOSE days him being the older of his siblings kinda thrust him into work and NVR past 7th grade so what I have learned has been through many many trials and errors I will be very appreciative of ALL the help that’s give God Bless Your endeavors

  2. Martin Richardson

    Planes Knox is much like a gambler you have to leave emotions out of it the most problem I have is trying to understand why I wanna get into a trade and where I find out that information what are the potential rewards the risk are being wiped out and wind him know when to pull the trigger and get out of all of the people I’ve subscribed to and the money I spent on their courses hasn’t taught me a damn thing what can you do to make it different

  3. Hey Tom I I have been trading TD Ameritrade fighting with them to get my account so I can trade options. And I am still working to get my account set up for options trading I have been trading is closed in the margin it in the margin up and down getting my butt kicked so if you don’t think that will make you emotional and then I’m worse in a woman right now on steroids. I haven’t made the first options trade at all. So I have tried the crypto market with Voyager Voyager so needless to say I guess they’re going bankrupt and they have all my money tied up with them also so I guess has not been a very good experience for me I’m very angry as hell needless to say. And When the market is hitting ever company out there taking them down to a 60 70% loss they make a little option trading or look like a joke. So I’m still trying To get my account trading out at TD Ameritrade so I can trade options which I have started with you back in February. So I’m still working on getting options going now Voyager has got 51,000 grand of mine on what ever in hell is going on are Ponzi scam and my wife ask me what is wrong with you and she didn’t say honey. That part was free.!!!

  4. Man! Those rules Tom are definitely something to live by and survive by. That’s truly the Think and Swim mentality that all Traders should live on and guide by! Thank you a million times Tom!!!

Leave a Comment

View this page online: https://powerprofittrades.com/2022/08/avoid-these-trading-mistakes/