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There are some very common mistakes that investors and traders make repeatedly. Unfortunately, these same mistakes have been made since the dawn of modern markets and will likely always be repeated throughout existence of the markets. This is why reading charts are so important. They are a mirror image of investor reaction in the market and reveal the same mistakes over and over again.

You can significantly boost your chances of success in the markets by becoming aware of these typical, repeated errors and taking steps to avoid them. In tonight’s topic we'll explain the most common mistakes and how to avoid them.

1. No Plan If you don't know where you're going, any road you take will get you there. If you have no plan, you can’t get where you want to go.

We recommend having a personal trading plan or policy that addresses the following issues.
Goals and objectives – Have an idea of what you're trying to accomplish using the stock market as your vehicle to get where you want to be. For example, accumulating $200,000 for a child's college education or $2 million for retirement at age 55 are appropriate goals. Just saying you want to outperform the market is not a goal.

Risks - What risks are relevant to you and your portfolio? If you are 25-years old and saving for retirement, the day to day market volatility shouldn't be an issue or meaningful risk. At the same time, a young person 25 years old cannot afford to be too conservative because inflation will erode any long-term portfolio if you do not have enough exposure to growth stocks.
Having a good plan and sticking to it is not nearly as exciting or as much fun as trying to time the markets, but without a plan, you won’t get where you want to be in the end.

2. Time Horizon is Too Short Most investors are too focused on the short term. The stock market is a tool to help you achieve financial freedom but that doesn’t happen over night. It takes time and too many participants want success too fast and get frustrated when they don’t achieve that success. Over time, you will succeed but you have to learn before you earn.

3. Financial Media a Waste of Time Too much attention is given to financial media such as CNBC and FOX Saturday and various shows like that along with newspapers and magazines like Money and Barons. Believe me, I used to read and watch them all when I first started in the markets and not once did they ever help me make any money. In fact, most of the time, I lost money buying stocks they recommended only to have them go down shortly afterward. There is almost nothing on financial news shows and in papers that can help you achieve your financial goals. Instead, we recommend watching the charts on your computer screens. That is where you’ll make the most money.

Conclusion Investors who recognize and avoid these common traps give themselves a great advantage over other market participants who can’t stay away from these common mistakes. The solutions above are not exciting; however, you are likely to have a better chance of profitable trades if you avoid the traps most everyone else falls into.

David Colletti
Founder
StockTradersHQ.com
The Headquarters for serious traders.

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