Short Term Trading (Australia Day) Weekend Lounge: 25-28 Jan, page-32

This first part is based on what I have observed recently, with no disrespect intended to anyone. However I thought highlighting this crazy, emotional trade might be helpful to some.

How to LOSE money on the market:

1. Buy a stock hyped on HC, expecting to be able to flip it for a few pips quickly after it has had a good announcement.
This can work sometimes but unless you know exactly why you are buying (and no, wanting to flip it for 2 pips is NOT a reason, you need a reason why it’s going to continue to rise) you will lose more than you win. Quite often, announcements are built in to the price in advance so holders sell on news.

2. When your stock falls after purchasing, post on HC daytrading asking what you should do.
You ALWAYS need to have your own strategy when you buy a stock which dictates when you’re going to sell – both taking a profit or minimising a loss. You need to be prepared for both outcomes. Also be clear in your own mind as to how long you are willing to hold that stock – if it’s a daytrade, sell quickly, other trades will be longer term, waiting for a price target or event or what ever is dictating your exit. Trading without a plan and worse, relying on others to advice you on what to do, will lead to disaster

3. Kid yourself that you are a trader.
I guess there’s a continuum so technically buying and selling shares makes you a trader. However to be a "real" trader with any chance of staying in the game , you need to have a system and strategies and put in the work. This is harsh but I think if you just buy and sell “hot” stocks without any real understanding of what you are doing, you are kidding yourself that you are trading. The market has been very forgiving for a long time really, although the last 6 months have been particularly easy, so you might be able to get away with that for the moment but when times get tougher, you won’t stand a chance unless you put the work in.

4. After buying on hype and watching your stock go down without knowing what to do, sell as soon as the stock rebounds and you can break even or even take a minimal profit.
This “relief” selling links back to the previous points about having a strategy and once again, you need to understand the stock so that you can  set a sell point that is based on some sort of informed reasoning. This point is frequently cited as a beginner mistake and is a great way to minimise your gains as quite frequently that rise is a bigger move and you could have made much more money if you had an informed plan.

5. After you’ve sold, watch the stock continue to rise and then post that you’re thinking of buying the stock (once again near short term highs) and asking on HC again whether you should be buying.
Refer to previous points – you’ll never survive as a trader if you don’t take responsibility for your own trades, do some research and have a clear strategy. Also being behind a price move, rather than on the wave or ahead of the move, will lose you more money than you make.

Apologies if you recognise this as you. However this poster is not be unique and there would be many newbies following that losing strategy so if you do recognise this, you are not alone. Most of us have been there and done that. The intent of this post is to help, not to hurt, so I hope that someone can learn from it.

Other ways to lose:

This section is just re-iterating comments made on this forum in recent times.

6. Get caught up in the hype and excitement and “glamour” of daytrading.
Be very careful of daytrading and the daytrading forum, particularly if you are a newbie. Consistent daytrading is difficult and the average daytrader frequently makes great profits and then give most of it back when they go through a rough patch. Some people are suited to it, most are not. There’s some good leads on that forum but there is also a lot of ramping of stocks which people already hold. Also successful daytraders are very decisive and very skilled. They will frequently have traded a stock 3 times while someone new to trading is still trying to decide whether to buy or not. (And you don't have to be new to relate to that. I definitely don't have the speed and decisiveness required for daytrading. I do some daytrades when the conditions are right for me, but would never classify myself as a daytrader). However, there are some excellent day traders and they are good to observe and learn from, just don’t kid yourself that you will be able to keep up with them. You may but most won't and it's not a negative to admit that some styles of trading just don't suit you. You just have to find your niche.

7. Blindly following other people.
Even if you follow a very successful trader, you can still come unstuck as you may not have the same timeframe or the same trading style. So for example, someone might pick a stock early and be willing to hold it until an event occurs but you may not be able to hold it for that period of time so they might make multibag profits but because you couldn’t hold on that long, you may sell for a loss. There’s an old saying that the market can stay irrational longer than you can stay solvent. At a more personal level, there are also other traders who will stay solvent longer than you so they can wait through long delays whereas you may not or you may simply not have the patience and want to focus on other opportunities. The flipside of this point is that sometimes others will be happy to flip for a pip and you’re aiming for a bigger profit, so the trader you follow is long gone while you lose confidence and don’t know what to do with your holding.

8. Needing to “keep up” with other traders, (if it makes you emotional or messes up your trading style).
Others can be a benchmark to measure yourself against but there will always be those who make more than you and those that make less. Trying to keep up can throw you off your own personal trading style and once you’ve lost your strategy, you will be well on the way to losing. Benchmarking can be a positive or negative, depending on how you use it and how it affects you. Don't do it if it makes you emotional as envy, needing to impress etc can lead to more losing trades. Trading is a journey of continual self improvement and if measuring yourself against others, doesn't work for you, just measure your improvement and celebrate your personal improvement. If benchmarking does work for you and pushes you to do better, ignore this point and go for it.

9. Thinking trading is easy and you don't have to work too much.
Trading definitely gets more mechanical and easier with experience and the more knowledge you build up, the easier research is. However, if you do want to be successful, you will always have to put in the effort. There's no free lunch here even if some people make it look that way.


My biggest mistakes

This is personal but thankfully, most of these are historic and some are nearly in the archives! #5 is still current but I at least have a strategy for that now.

1. Not doing the math on leverage.
I knew leverage was a magnifier and increases your profits on the way up and increases losses on the way down. However, I hadn’t done the actual math and completely underestimated the size of losses I could make by trying to hold through a down patch.

2. Being forced to sell with a margin loan – variation of the above point.
I had stocks which I had a clear strategy for and they were good stocks which I was happy to hold during a rough patch. However, pros do try to trigger margin calls and I got hit by one of those which meant I had to sell at what I thought (and actually was) the bottom. It didn’t matter how good my strategy was as I couldn’t stay solvent. What hurt most with that one is that I just needed to get through an extra day or two. It really was the bottom when I got caught out

As a result of 1 & 2, I don’t use margin loans or leverage anymore. Even though I am confident that I wouldn't repeat those mistakes, I just don’t think it’s worth it and I guess I’m in the financial situation now that I don’t really need it anyway.

3. Sticking with a stock for too long.
If a stock had a good story, I tended to keep holding while the story unfolded. However, no matter how good stocks are, they tend to have the best SP gains early. While the long term story was good, I kept holding after the SP run up which just tied up capital for no further gains or minimal gains which just weren’t worth it. Some I held to a loss. . Regardless of whether I took a profit or loss, I have had heaps of stocks over the years which I should have sold earlier because holding them held me back overall.

4. Free carry complacency.
I bought PDN at about $1 and sold a third at around $4.50 which was my money back plus a little profit and then sold another third at about $9. Great! But then I thought it would be a good long term stock as they were about to get their second mine producing and I thought they’d be paying a dividend eventually so I left the remaining third in the bottom drawer. Life got busy and I didn’t pay enough attention and then eventually sold the remaining third at about breakeven. Not disastrous but seriously stupid! Technically some of my stocks are free-carried but I don't consider them to be as I avoid that mindset. Every stock that I hold has to earn its place in my trading portfolio. Even my longterm, investment stocks don't get a free ride. I know that some people seem to manage free carry strategies well but it's definitely not for me.

5. Being fully invested so not having the free cash to be able to take advantage of good opportunities.
I still struggle with this today but at least I take profits out of my trading account now so I do have cash backup IF I really need it.

6. Nearly forgot my big loss. I was overweight on a stock which I was confident was going to have good results and they didn't and gapped down massively. Both junior biotechs and junior oilers are great at that because the results tend to be binary - you either win or lose. None of the inbetween that you get in other sectors or bigger stocks. Mine was an oiler. So moral of that story was to ensure that you are positioned for any outcome and are able to handle an adverse event. Also there were no signs of confidence on the market (no positive leaks) but I had read all the announcements and thought I knew better. Never ever over-commit on a position no matter how confident you are. The market is full of stories of people wiping themselves out when they thought they were on a sure thing. Some bounce back, some claw their way back and some never recover.

I feel like I'm in a good place with my trading now.While I could do better and have lots of room for improvement, I'm past those big glaring mistakes of my younger years. But gosh, there have been some shockers. Experience in the market is so valuable. Never underestimate it.


There's really nothing new in that lot. The same things always pop up in articles, trading books, posts etc. So I've just reinvented the wheel. lol. Hope it helps someone.