Certain mistakes pop up repeatedly in my discussions and emails with traders. Here are three of the most common:
1) Trading Without Context - Many traders will enter positions with little more than a chart-based "setup" or a hunch that the market is heading lower. They don't locate where the market is trading with respect to its daily range and often can't identify where the relevant ranges are located. Is the most recent market move gaining or losing volume/participation? Are most sectors participating in the move? Without context, traders trade reflexively, not proactively.
2) Trading Without Targets - Focused on entries, traders often don't explicitly identify where they would harvest profits. They hold trades too long, exiting in a panic after reversals, or they take profits quickly, missing opportunity. They don't factor current volatility into estimates of how far the market could move on their time frame, and they often don't explicitly look for targets based upon prior moves and ranges.
3) Trading Without Reflecting - The slow times of day are excellent opportunities to review trading for the day, reformulate market views, correct mistakes, and set goals going forward. Many traders, however, never stop looking for the next trade, lured by the siren's promise of breakout. Without the benefit of reflection, they compound errors, turning mistakes into blowups and blowups into slumps.
All three of these mistakes are variations of the same challenge: remaining mindful, even as you're absorbed in markets. (See this post for further thoughts on mindfulness in trading). Without that mindfulness, traders react to markets, losing a measure of control. Ultimately, the only edge in trading--like in poker or blackjack--is that you can decide when and how you'll trade.