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Exhaustive list of trading mistakes I have done so far in the last 3 years. It's a must for everyone to have a NOT-TO-DO list alongside a TO-DO list. This is my Not-To-Do list for trading.
1. If you are trading a system, internalize all the rules - entry, exit, stop loss, re-entry, etc., like the back of your hand and only then do live trading - if you're trading it manually.
2. If you exited a trade prematurely in profit, don't re-enter again unless the trade is still valid by the close of the candle of the TF you're watching.
3. Have a daily stop loss amount, weekly stop loss amount, monthly stop loss amount. If you have lost that specific amount, stop trading for the day, week, and the month respectively. (Applicable for discretionary traders)
4. Avoid FOMO trades outside of the system you're trading. FOMO often leads to so-so trades that may even lead you to losses.
5. Do not close a trade prematurely out of fear when the trade starts reverting towards your stop loss. If it hits the stop loss, let it hit. Look for re-entry setup or sit out.
6. If you're a trend follower, make sure you design a system in a way that you leave enough room to trail the market going in your direction without getting stopped out, to capture maximum points. Stop loss too close - get stopped out frequently, too far - give back to market.
7. Losses don't make you unworthy of happiness, good things, and love in life. Profits don't mean you're the king of the jungle and that you are invincible. If profits and losses have an emotional impact, you have a lot of work to do.
8. Never trade without a stop loss order. And don't put an SL-Limit order in volatile markets. In volatile market conditions, SL-Limit orders have a high probability of not executing and price whizzing past your stop loss. Experienced this personally this march.
9. To a certain extent Open Interest data doesn't matter all that much. If someone like PRS is controlling 5 or 10% of OI in few strikes, you know how unreliable it is. So, don't base your trades solely on Open Interest data or OI change.
10. Open buy vs sell orders can be spoofed. So don't be fooled by a tilt/shift in the buyers vs sellers on market depth.
11. Time & Sales, Supply & Demand regions, Volume, and Volatility along with Price. These are the only parameters required for successful trading. Don't venture out of them in developing systems.
12. Don't trade options by skinny-dipping. If you're going to trade options, learn the ins and outs of options, spreads, and strategies, learn about Option Greeks and how they behave under various circumstances. Touch options only once you fulfill this condition.
13. Don't buy options and keep it over a weekend. It's better not to buy options for positional unless you're sure of the volatility, direction, move, and timing, at least with a certain level of probability favoring you.
14. Even regarding trading stocks, have a stop loss. Stocks that go down usually continue going down. Stocks that go up usually continue going up. These two conditions are true until they change direction. You can always find a better point for re-entry in stocks.
15. If you trade stocks without stop loss, and it's in loss, suddenly don't decide to convert the stock position to a long term investment and that you'll wait to exit at cost no matter how long it takes. BAD IDEA. Usually you'll exit at a much worse loss amount.
