Top 5 Worst Trading Habits

Here are the top bad habits to avoid when you are getting started in your trading career. Whether you are new to trading or a veteran, you will want to avoid these habits at all costs. 

Not Having a Trading Plan

Many new traders will blindly enter trades without having a trading plan. This means they have no firm idea as to why they entered, what their target profit was, what their exit should be, or where to place a stop loss - They have entered their position on impulse. Without a trading plan, buying / selling a position is merely gambling. For this reason, we teach proper risk management skills very early on in the Options Mastery Course and our other educational offerings. Risk management and trading plan execution are one of the most important skills to master. 

Revenge Trading

Revenge trading is a common occurrence amongst new traders who have recently sustained a loss. It is also the leading cause of trader failure. Revenge traders will double down, average down again, and continuously dig themselves deeper and deeper into a losing position. The end result is they get lucky and the stock bounces to give the trader a small amount of profit or break even; or worse, the stock does not bounce and they end up sustaining a massive loss on their account.

Profit Mindset

Undisciplined and unprofitable traders almost always have this mindset. They are focused on how much money they can earn in a particular trade if they are correct. This is a huge mindset flaw that I see in most amateur traders, and almost all of our students exhibited this mindset at one time or another. Profitable traders always exhibit a trading mindset of how much money can be lost with this trade.

Due Diligence

Unprofitable traders have a bad habit of not doing proper (if any) due diligence before entering a trade. This idea ties back into our first topic of having a trading plan. Profitable traders complete proper due diligence before entering their trade (i.e. technical analysis, trade plan, etc) to ensure the odds of the trade are in their favor. 

Bad Sources of Information

Profitable traders engage and network with other profitable traders in a Thinktank. Unprofitable traders rely on untrusted sources like Stocktwits and CNBC for their trade ideas and news sources. Being in a group of like-minded individuals who you can trust is an extremely valuable tool to have and use as a profitable trader. Too many times I have heard of people going in on a trade idea that they saw on Stocktwits only to have it go sour. This would also be considered poor due diligence. 

That wraps up the top 5 most common bad trading habits to exhibit. How did you rank? Do you occasionally have some of the behaviors that were mentioned? It is important to be conscious of where your bad habits are, and nip them in bud.