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Trading Psychology

10 Common Trading Mistakes

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Written by Timothy Sykes
Updated 2/25/2021 14 min read

New traders almost always look for ways to improve their trading, but knowing common trading mistakes is just as important.

No trader has a perfect trading record. You will make mistakes and you will lose sometimes. But that doesn’t mean you can’t learn from traders who have experience…

And it definitely doesn’t mean you can’t learn from your own slip-ups.

I’ve compiled this list of 10 common trading mistakes, so you can learn to avoid them and trade smarter.

Throughout your trading journey, refer back to this list often to make sure you don’t fall back into these traps.

#1 Relying on Hot Stock Picks

One of the biggest mistakes most new traders make is thinking they can get rich by following other people’s trades and stock picks.

Too many traders don’t want to study or work hard. Instead, they say things like, “Hey Tim, give me a hot stock pick … just tell me which one to buy.”

Sorry, it doesn’t work that way. You should NEVER follow anyone’s stock picks or trades…

You need to learn market skills for yourself. You can’t rely on someone else. The reality is, this industry is full of fakes. So many traders claim to be successful but really have no idea what they’re doing.

Don’t blindly follow others. Instead, learn from traders who have a transparent track record and who can teach you how to develop your own trading strategy.

I teach my Trading Challenge students to be self-sufficient. They learn to adapt to the market and think for themselves. They don’t need to rely on someone else to tell them what to buy and how to trade.

#2 Having the Wrong Mindset

If you got into trading because you think it’s a ticket to get rich quick … or if you only think about the money when you’re in a trade … then you have the wrong mindset.

The ‘get rich quick’ mentality will affect your ability to execute and manage trades — and not in a good way.

When you’re in a trade, you should focus on the reasons you’re in the trade … your thesis, the indicators, managing your entry and exit. Don’t focus on the profits. 

If you want to be in this game long term, you need the right mindset. And that isn’t getting rich quick. Your goal should be to hit singles, not home runs.

#3 Being Unprepared

Traders who want hot stock picks and ‘home-run’ trades aren’t prepared for the market. They’re not prepared mentally to manage risk and react to the many scenarios that are possible when you’re in a trade.

How to help prepare? Study the past before putting your hard-earned money on the line in any trade.

It takes time and dedication to study, but you must be willing to learn the patterns, practice and refine your strategies over time, and continually adapt to the markets.

It’s a marathon, not a sprint. Take your education seriously so you can be prepared for those awesome setups when they present themselves.

There’s so much free education on the internet, you have no excuse not to study!

#4 Using the Wrong Broker

A lot of new traders start with the cheapest broker they can find. They think saving a small amount on commissions will increase their income. But the thing is, using the wrong broker can actually cost you more.

Cheap brokers can screw you over with bad executions, poor service, no tools, or worse

When it comes to brokers, you need speed. When you want to buy a stock for a specific price, you need quick executions, especially when the stock is moving fast. And if you’re in a trade and need to get out fast, bad executions and lagging data can hang you out to dry.

Make sure you choose the right broker for your strategy. If you short penny stocks, you need a broker that has shares available to short. Brokers usually charge locate fees for you to borrow shares, so be careful and do your research. Make sure there’s still room for profits after all the fees.

Penny stocks can move fast. Use the tools and brokers that can help you keep up.

#5 Trading the Wrong Stocks

Sometimes new traders think they see a pattern on a chart and jump in without considering any other indicators, such as volume, catalysts, and volatility.

If you jump into trades without doing your research, you’re not trading — you’re just gambling. You don’t know if it will go up, down, or sideways.

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Worse, you can get stuck in your position or be forced to sell for a way lower price just to get out. There has to be volume in the stock so you can easily get in and out of your positions.

Learn to focus on the biggest percent gainers for the day, with lots of volume and preferably a catalyst. Want to learn more about it? Here are some great no-cost resources for traders.

#6 Lack of Self-Discipline

People with no self-control and poor discipline will struggle in the markets. If you can’t follow the rules and control your actions and emotions, there’s little room for improvement.

I teach my trading rules that have brought me success, but you have to have the self-discipline to follow them.

Remember to Cut Losses Quickly

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My number-one trading rule is to cut losses quickly. When you’re in a trade and it goes against you, you need to get out!

If you’re down on your position and you don’t cut your loss, you risk the money in the trade … but you also risk your probability of staying in the game. If you take losses that are too large, you can blow up your account fast.

Learn to take small losses and review every trade. Learn to manage your risk. Never hold and hope.

Don’t Chase

So you see a stock spiking and you’ve gotta get in at any cost, right? Wrong! This is a classic newbie mistake. Don’t chase stocks. You risk buying at the top and having to chase it down to get out.

Poor entries can affect your entire trading mentality. It can affect how comfortable you are in a trade. If you miss your entry, it’s OK to miss the trade.

Learn to build and stick to your trading plans. It can make it so much easier to keep the big picture in mind. You can better learn to stick to your entry and exits. You did the research, so you have better expectations of what might happen.

But if you chase a stock and get in at any cost, then what? What’s your risk? What’s your goal?

Learn to be meticulous when you plan your trades and remember that you need discipline to stick to your plan.

#7: Forcing Trades

When you see a pattern setting up, you’re probably looking forward to the trade. You’re anticipating what the stock might do … you want to jump in and nail it.

But careful … don’t force the trade. Patience is key when you plan your entries. You need to wait for the best possible opportunity to buy.

Be sure to focus on your patterns and fine-tune your timing. Trade to your patience level and do what feels comfortable to you. Don’t rush into a trade you don’t have a plan for and don’t try to buy early, thinking you know what the stock will do.

When you don’t wait for the best plays, it drains your mental capital and can impact your ability to execute the next time you try to trade.

Hey, even I still do it sometimes. Here’s a great example of how I still learn from trades, even after over 20 years in the markets.

#8: Trying to Guess or Anticipate Earnings

Anticipating or trying to guess what a stock’s reaction to earnings will be, is exactly that — a guessing game. It’s not a strategy. I always wait for price action to show me how the market’s reacting.

An example that comes to mind is this trade from back in November:

Roughly $3,000 in profits for me on MITK all because I employed my favorite pattern of dip buying earnings winners, as long as they hold technical support…I now have 600+ videos HERE on earnings winners, I suggest you learn this pattern ASAP!

Some traders will say, “But Tim, this company had really good revenue this year. I’m just going to buy pre-market while the price is still low.”

But then when the market opens they watch it tank because they didn’t know as much as they thought they did.

I want the chart pattern to show me whether it’s an earnings winner or loser. I don’t guess earnings ahead of time — I wait for the price action to indicate whether there is potential in the stock.

#9 Confusing Investing with Trading

When traders confuse investing with trading, they buy a penny stock to hold it long term. They hold and hope — thinking the price will continue to go up.

Maybe they base that on the company’s technology or products. Maybe they just like the company. (Here’s why what you think of a company doesn’t matter in trading.)

Bottom line: You can’t evaluate a penny stock the same way you would a large-cap company. Here’s the deal with investing vs. trading…


Investors buy stocks to hold them long term. They believe in a company’s fundamentals, such as earnings, products and income, and the company’s management.

This can involve holding on to the stock for weeks, months, or years.

Penny stocks aren’t like that. Most of these companies are junk. A lot of them only have one or two products. Most of them will eventually go bankrupt.

I do NOT invest in penny stocks! I trade this niche with specific setups. I’m not investing to hold the stock long term. Remember, most of these companies will fail.


Day trading is when you execute a trade — a buy and a sell — in one day. Some traders execute multiple day trades per day.

I day trade penny stocks. I’m usually in and out of stocks quickly, sometimes in minutes. If the right setup presents itself, I may hold overnight, anticipating a gap-up the next morning.

I trade based on patterns and news. I plan my trades. And I only trade the best setups.

An important thing to note: you need to understand the pattern day-trader rule (PDT). The PDT set restrictions on the number of day trades you can execute per week if you trade with a small account.

Still confused about the difference between investing and day trading? Check out this free webinar where I go into more detail about the stock market, my strategy, and my mindset.

#10: Going It Alone

A lot of new traders struggle for a long time on their own trying to figure out the stock market.

There’s no reason to struggle and lose tons of money. But you’ve gotta invest in your education.

There are so many online resources. Use my YouTube channel. Take my free PennyStocking 101 course. Get a mentor.

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Having a mentor can help you speed up your learning curve. Learn from experienced and transparent traders. I never had a mentor, and that’s why I teach now. I want to be the mentor I never had to my students.

There are so many opportunities in the stock market. Learn as much as you can from successful traders — their mistakes and wins. Work to find the strategies and setups that make sense to you. You don’t have to figure it all out on your own.

The Bottom Line

One final important note: All traders make mistakes. Nobody’s perfect. You won’t be right 100% of the time.

You need to accept that being wrong is part of trading. Even after 20+ years in the markets, I still mess up trades … You can see all my trades on Profit.ly — wins and losses. Plus, there are over 6,000 videos to help you learn the markets.

So yeah, you’ll lose sometimes. And that’s OK, especially if you follow rule #1 and cut losses quickly.

Be disciplined and continually work to improve. That’s one way to help cut down on your mistakes. And when you do make mistakes, make sure they’re small. Never take big risks that can knock you out of the game for good.

Ready to be a smarter, self-sufficient trader? Apply for my Trading Challenge today. 

What’s the biggest trading mistake you’ve made and what did you learn from it? I love to hear from you … Leave a comment!

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Author card Timothy Sykes picture

Timothy Sykes

Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”