10 Common Weaknesses

(Especially Shorter Time Frame Trading)

 

1.     Not Staying Out Of The Market

Not knowing or defining a repeatable process for identifying when to stay out

Not having the patience to stay out when conditions aren’t favorable

 

2.     Not Giving Market Movement Enough Weight

General market direction and movement affects 75% of stocks

Most trades should be in sync with general market and/or sector movement

Ignoring higher trading time frame trends, support, resistance  

Being unaware of current time frame market movement

Unaware or disregarding the significance of price movement beyond 

pre-market and multiple time frame ranges (market and stocks)

 

3.     Not Having A Repeatable Timing Methodology

Unaware of intraday time tendencies, seasonality, cyclical business cycles

Ignoring breadth (e.g. advance decline line, advance decline volume)

Not having a consistent way (in real time) to quickly identify catalysts

Myopic price vision vs. seeing the bigger picture and continuous nature of 

price action on multiple time frames

 

4.     Not Having A Framework To Understand Trending Vs. Range Bound Action

Ignoring higher trading time frame trends, support, resistance  

Not defining / identifying if it’s a range bound or trending environment
Not being on the right side of the ranges and trend

Disregarding the significance and common types of price movement beyond 

significant ranges (e.g. pre-market, daily, weekly, monthly)
Not framing pre-market, opening or closing price movement 

Intraday traders - not being on the right side of pre-market range

 

5.     Playing Ranges Incorrectly

Being indecisive / unclear about one's approach i.e. breakout or range entries

Not defining when a range strategy will be used

Long at top of range instead of short

Short at bottom of range instead of long

Favoring reversion to the mean over trend

 

6.     Poor Candidate Selection

Ignoring higher trading time frame trends, support, resistance  

Not avoiding choppy, sloppy price action (vs. smoothly trending swings)

Not avoiding narrow, range bound / contracting conditions

Not identifying strong and weak sectors or groups

Unaware or ignoring general market direction

Unaware of routine economic data that impacts sectors / stocks

 

7.     No Trade Triggers / Edges

    Not having a repeatable method of putting price action into context

No real play, pattern, base, or setup

Executing without a strategy’s entry / exit signals being triggered

Poor entry location (large distance to wrong, wrong not falsifiable, arbitrary stops)

Shorting price strength / strong sectors / breaking resistance 

Long price weakness / weak sectors / breaking support

 

8.     Mismanaging Losses

Adding to losers instead of taking a loss

Moving stops instead of taking the smaller, original loss

Moving stops to prevent ‘being tricked’ / whipsawed

Making stops too large and the related loss too ‘uncomfortable’

Swinging over losses (day traders)

Not taking a timeout to regroup after a series of losses and 

identifying the reason for under-performance

 

9.     Improper Money and Risk Management

Unprofitable trades are feedback -wrong about stock selection, direction,  

timing, entry location quality,  stop management, etc

Not reducing size with consecutive/increasing frequency of losses

Increasing size with consecutive/ increasing frequency of losses

Not trading less with consecutive/ increasing frequency of losses

Position sizes that are too large

 

10. Lack of Emotional Awareness & Regulation

Fear of missing out, taking a loss, being ‘tricked’ by whipsaws, etc

Fear is responsible for most psychological challenges

Fear is often due to undercapitalization issues / pressures

Impatience is extremely counterproductive

Impatience with slow, grinding, wavy trends or  choppy price action

Fear is usually at the root of impatience

Patience is a significant edge*