11 Worst (but Common) Trading Mistakes – Doing Them = Losing Money

Trading concepts

Trading Mistakes

Always remember that trading mistakes are common and inevitable. As you know, making mistakes is a common and inevitable phenomenon in almost every aspect of human life. AND trading isn’t any exception because making mistakes in a risky arena like trading is even more common and inevitable. It isn’t surprising to know that the worst trading mistakes are common and probably every trader, even the most successful one, makes those mistakes somewhere in the trading journey. What are those common mistakes? It is the topic of this article. 

In this article, we are going to explain the 11 worst but most common trading mistakes traders make. We call them the worst mistakes because making those mistakes is synonymous with losing money. 

Trading mistakes

You often read or hear about a very popular saying about trading. The saying is “trading is simple but it isn’t as easy as it seems”. The saying is absolutely spot on as trading is simple but not quite easy. The risks, surprises, and uncertainties presented by the world of trading are far more than enough to make it difficult. It takes a great deal of learning, patience, and discipline to make inroads into the trading arena.

Why is there no cookie-cutter approach to taste success in the world of trading? It is because this complex ecosystem has its own rules and regulations. Following those rules means success. Whereas, failing to follow them means losing your hard-earned money. Moreover, every trader has to make his/her own path and has to face a series of ups and downs. Thus, hitting success isn’t a straightforward task. Instead, it requires a lot of hard work, learning, time, and energy. Moreover, learning from mistakes is the most important but often neglected aspect of achieving success in this arena. 

 As you know, no one in this world is perfect and making mistakes is a common human phenomenon. And it is next to impossible not to make mistakes in a complex landscape like trading. In fact, no one can claim to never make mistakes, not even the most successful traders in the world. So, you aren’t alone in this arena who has made or are still making trading mistakes. As you know, it is a common and inevitable phenomenon. However, not learning from your mistakes isn’t a common phenomenon. The world’s most successful traders also made mistakes but it is learning from their mistakes that made them taste success. 

That said if you want to hit success, learn about the worst trading mistakes traders make and try to avoid them. Additionally, you can learn from those mistakes and maximize the odds of your success in this arena. In fact, making trading mistakes is part of your overall learning process. So, keep reading about the most common trading mistakes, learn from them, and try to avoid them in the future.

11 worst trading mistakes

Always remember the following 11 worst but common trading mistakes and try to avoid them.

1. Unrealistic expectations

Most traders are guilty of making a big trading mistake and that is having unrealistic expectations. Setting unrealistic expectations means laying the wrong foundations for trading. In fact, traders often set unrealistic expectations about almost all aspects of trading. For example, they may expect unrealistic trading success. Similarly, they may also expect unrealistic results and timeframes. 

Firstly, let’s discuss unrealistic expectations about success in trading. As you know, emotions are a very important part of human life. Our emotions, if not controlled, often make us think about success unrealistically. For example, emotions make us think that achieving success in trading is a straightforward and linear process. We just continue to improve and eventually reach the very top of our skills and trading career. However, this isn’t the case. It is just an illusion created by our emotions.

Remember, trading is simple but not quite easy. Success in trading is never a linear process. Instead, it makes traders experience a lot of ups and downs before hitting success. You may even find your most perfect trading system fails at some point. For example, you may incur losses when following your most successful trading setup and doing everything right. Yes, this is a trading arena and everything is possible in this arena. Therefore, never think about gaining success in trading a linear process. Otherwise, no one will be able to save you from disaster, disappointment, and despair. 

Secondly, traders also think unrealistically about trading results. You shouldn’t expect to make millions overnight. Similarly, you shouldn’t expect to be successful in each trade. Instead, you should think about results realistically, consider your account size, and expect returns accordingly. Thirdly, traders are also guilty of expecting success in no time. You cannot expect to get a university degree in months. Similarly, you shouldn’t expect success in trading in just a few months. Conversely, you need to commit time to prepare yourself along the way to hit success. 

2. Unreliable trading plan

Most traders enter trading without a reliable trading plan. Some don’t even have a trading plan and still expect success. The point is simple here. Can someone reach a destination without having a plan for how to reach the destination? Similarly, inexperienced and novice traders want to reach the destination but don’t have the prerequisites to reach there. 

As you know, experienced and expert traders always have a sound and tested trading plan. They have everything covered in their trading setups. For example, they know when to enter or exit a trade, the amount of capital to invest in each trade, the risk/reward ratio, and so on. Conversely, traders trading without a trading plan may act capriciously. For example, they may exit a trade early and miss out on an opportunity to maximize their gains. Therefore, commencing trading without a proper trading plan is among the worst trading mistakes. You need to avoid it to achieve the success you are after.

3. Ignoring risk management

Another one of the worst trading mistakes traders often make is ignoring risk management. For example, they don’t use stop-loss orders and allow their losses to grow. Not using a stop-loss order also indicates there is no trading plan. Whereas, stop-loss orders are among the most important risk management techniques. They limit your losses in case of adverse price movements. Thus, they cap losses before they grow and become sizable. Given the fact that letting losses grow is a big mistake, you should always avoid this.

Always remember that all successful traders have a common but defining trait – their ability to cut their losses short if a trade isn’t going their way. Instead of hoping for a favorable price reversal, they move on to the next trade. Conversely, inexperienced traders often feel overwhelmed and paralyzed when a trade goes against them. Instead of taking immediate action to cap losses, they sit out and hope for favorable price reversal. As a result, losing trades bound trading capital for a long time and eventually become huge losses. Therefore, always use proper risk management techniques to cut your losses short and save your capital.

4. Don’t understand what causes price movements

Not knowing what makes prices move up or down is also among the worst trading mistakes. Expert traders know all about the forces of supply and demand. They fully understand why prices rise or fall. Moreover, they also know where the smart money is moving and they follow the tracks. Conversely, novices never try to understand what are the factors that make prices move up or down. They never try to understand supply and demand. That’s why they end up following where dumb money is heading instead of following smart money. Therefore, if you want to avoid this mistake, start learning about the forces of supply and demand. Additionally, learn about all other factors that cause the prices of securities to rise or fall.

5. Trading against the trend

Trading against the trend is also among the worst trading mistakes traders often make. This is the mistake that traders make after assuming that their contrarian view is right. However, it is a fact that you should never be sure about financial markets. It is important to note that no price is too high for bulls. Similarly, no price is too low for bears. Yes, it is hard to resist temptation and make quick money. But the problem is, the market doesn’t care about what you expect. Rather it has its own way of behaving.

As a trader, your job is to learn and understand the market and its behavior. Learning with the trend is always a good strategy in a landscape full of uncertainties and surprises. Moreover, trading with a trend is also easy. It doesn’t mean that always buy low and sell high. There are numerous strategies to trade with a trend. Follow those strategies and make good money. AND never go against the market as traders who go against the market always fail.

6. Don’t accept losses

Not accepting losses is also among the worst trading mistakes traders make. They don’t close their positions and limit losses just because they don’t want to accept losses. This is because traders don’t embrace the very basic fact that they are also humans. And being humans means being prone to making mistakes. Whether they bought an asset in haste, because of their emotions, or whatever, the best approach is to accept if trades go against you. Whereas, the worst trading mistake is to let your pride get the better of you and hold onto your losing position for nothing. 

That said, it is important to learn all about the financial instrument you want to trade or invest in. Do your homework, conduct technical analyses, and be disciplined. A fall in the price of a stock or any other instrument doesn’t necessarily make it a good buy. Buying low and selling high doesn’t mean buying blindly. However, if your trade still goes against you, accept your losses and move on. The market continuously presents opportunities and you need to keep yourself ready to grab the next opportunity coming on your doorstep. 

7. Expecting rationality from market

Another one of the worst trading mistakes traders often make is that they expect rationality from an irrational arena. Financial markets are irrational and that is why they can surprise you at any moment. There is no one who can predict a market direction with certainty. Even the experts give financial markets the benefit of the doubt and this is the right way. Therefore, go with the market and listen to it instead of imposing rationality.

As you know, there are millions of traders and investors whose actions move the markets. These large groups of buyers and sellers set the equation for supply and demand. Moreover, news events and other factors also play a huge part in determining market trends. Even the events expected to happen in the future get priced at the prices of financial instruments. That’s why markets don’t behave in a rational manner. And that’s why it is best not to expect rationality from financial markets. 

8. Going with too much margin

Margin trading means borrowing from the broker to buy securities. Margins are enticing for traders, especially for newcomers aspiring to make quick money. However, this also turns out to be one of the major trading mistakes. Although margins make more money, they also cause huge losses. Therefore, it is important to understand how margins work before going for margin trading. 

As we have mentioned earlier, margins are enticing and novices often get carried away by them. However, if your trade doesn’t fulfill your expectations and goes against you, it means a huge liability is hovering over you. You will be indebted to your broker for nothing. In fact, your broker may force you to sell your assets and return the borrowed amount. This can prove extremely harmful for your trading career. Therefore, it is important to know all pros and cons of margin trading before commencing it.

9. Overexposure to a particular instrument

Investing all or a major portion of capital in one instrument means putting all your eggs into one basket. One adverse movement of price can damage your capital. This is also among the major trading mistakes. It is never a good idea to trade on the basis of personal liking or disliking. It leads to biases and that leads to huge losses. You aren’t trading to honor your personal inclinations. The purpose of your trading endeavor is to make money. Therefore, do the research and invest accordingly. 

As you know, diversification is the best approach to avoid the aforementioned trading mistakes. It means you aren’t relying on any one instrument to make money for you. Instead, you are making investments in a variety of instruments to avoid overexposure to a single or a couple of instruments. Diversification also serves as a shield against volatility and extreme price movements of a single instrument. Additionally, another great advantage of having a diversified portfolio is that one instrument may perform better when another one is underperforming. 

10. Believing in unfounded trading tips and signals

Most newcomers and novices aspire to be highly successful traders and make quick money. Their desires and urges lead them to make some irrational decisions. One of those decisions is believing in unfounded trading tips and signals. For example, they may start following a trading guru online and begin to believe blindly in his/her suggestions. This is one of the worst trading mistakes. Always remember that it is your hard-earned money that is at stake. Therefore, it is your responsibility to think a hundred times before taking action. 

Most investment professionals and gurus often create hype about a particular instrument. You may also follow someone on a social media platform. However, this isn’t a good idea because you are running after speculations. It is your trading capital that will get destroyed. Therefore, never act blindly and believe trading tips or signals without further consideration. 

However, if a trading tip or a signal grabs your attention, the first thing to do is access the credibility of the source. Secondly, start your homework to understand all about that particular instrument. Don’t invest until you have all the facts and investment seems like a good opportunity. Additionally, you may also look for opinions from other experts or unbiased financial advisors. 

11. Follow the herd

Following the herd is one of the common trading mistakes that often cause substantial losses for traders. Novices aren’t often good at conducting research and technical analyses. Instead, they rely on others and start following the herd. As a result, they end up losing a significant amount of their capital. For example, they may enter an uptrend that is about to hit the correction and will soon reverse. So, what will happen? Losses!

Therefore, always do your own homework and let your research lead your way. Following the herd isn’t going to do good. There is a very famous quotation in the trading arena that trend is your friend. Follow this dictum just like all successful traders. They trade with the trend and always get in or out of a trade on time. Conversely, novices stay in the trade when the smart money gets out of it. Simply put, don’t ever follow the herd and forge your own way to get in or out of a trade to be profitable. 

How to learn from your trading mistakes? 

To err is human. Making mistakes is natural for human beings. Moreover, making mistakes is also a crucial part of one’s learning curve. That said, it isn’t a mistake to make a mistake. Instead, it is a mistake not to learn from mistakes. 

When it comes to evaluating your trading performance, there is one thing you must do – conduct regular reviews. It helps you figure out your trading mistakes. There is no need to feel shy about making mistakes. Every trader makes mistakes, even the most successful ones. However, what makes traders successful is learning from their mistakes. 

The wrap-up

In this article, we discussed the worst but most common trading mistakes traders make, especially novices. Firstly, they enter the arena with unrealistic expectations in their heart and mind. However, the trading world presents surprises every step of the way. Therefore, avoid harboring unrealistic expectations. Secondly, don’t commence trading without having a proper trading plan and trading strategy. It is your trading plan that guides you and illuminates your way. 

Thirdly, learn and understand different aspects of the financial markets. Try to comprehend what makes prices rise or fall and other aspects. Fourthly, always employ risk management techniques to limit your exposure to risk. Fifthly, diversification is the best bet to avoid putting all your eggs in one basket. Then it comes to following trends. Always follow trends, don’t expect rationality from financial markets, and never follow herds. Finally, don’t blindly follow any investment tips or signals. Always do your homework and only enter or exit trades when your own understanding commands you. 

Russell Crane

Russell Crane

Russell is an Algorithmic & Technical Analyst Trader @ PatternsWizard.
His passion is to share his knowledge about TA, patterns & more. Why hope for your trading to work when you can precisely know the performance stat of every pattern?

Are Candlestick Patterns Reliable

candlesticksWe loved Marwood Research’s course “Candlestick Analysis For Professional Traders“. Do you want to follow a great video course and deep dive into 26 candlestick patterns (and compare their success rates)? Then make sure to check this course!

Want to know which markets just printed a pattern?

Market Timeframe Printed on

Get “Every Candlestick Patterns Statistics”, The Last Trading Book You’ll Ever Need! 📖

PatternsWizard book - Every Candlestick Patterns Statistics

"Every Candlestick Patterns Statistics", the last trading book you'll ever need!

Pre-register now and receive the candlestick patterns statistics ultimate ebook for free before anyone else!

"All you need is one pattern to make a living."
- Linda Raschke

Awesome move! We are giving the last touch to the "Every Candlestick Patterns Statistics" book. We are very excited to send it to you right when it's ready. In the meantime, we'd like to gift you our trading roadmap and its best 55 resources. You'll shortly receive an email with the link. Don't miss it ;) Stay tuned 📈