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By Staff | Oct 2, 2009

Making mistakes is a part of the trading world. Every trader will make mistakes, but the best traders are the ones who make the least mistakes. Here is a list of 10 common mistakes made by traders that you need to avoid to increase your winnings in the market.

1. Following the crowd. Successful traders are contrarians. They often lead the pack and never follow the masses. They know catching moves before the crowd has a chance to react makes the biggest profits. Don’t be afraid to stand on your own in opposition to the majority. In other words, when everyone else is bullish, don’t be afraid to be

bearish. When everyone else is bearish, don’t be afraid to be bullish.

2. Trying to pick tops and bottoms. The best traders will let the market price action prove a top or bottom has been formed before taking a position. Trying to trade against the trend and pick a top or bottom is a risky proposition, where the possibility of taking a loss far outweighs the potential gain. By remaining patient and waiting for the market to tell you when a high or low has been formed, you’ll increase your odds for making a profit and reduce your risk.

3. Losing control of your emotions. The most successful traders possess personalities that allow them to keep their emotions in check, even when the position has moved against them. By remaining objective at all times, you’ll make more intelligent trading decisions and avoid making trading decisions based on emotions.

4. Letting loses run. Don’t be afraid to admit your position is wrong. When you have made a poor trade, take the loss and move onto the next trade and close out the position. Before you make a trade, decide how much you are willing to lose on the trade and stick to your plan. Even experienced traders will sometimes hold onto a losing position for too long, hoping the market will turn in their favor. Most times it will continue moving against them and they will end up losing even more.

5. Avoid using stop orders. Placing stop orders is one of the easiest ways to protect yourself against taking a disastrous loss. Although placing stop orders too tight can leave you out of the market, not using a stop can eliminate all of your capital.

6. Being greedy. It is one of the first things every trader learns, let profits run. When a trade goes in your favor and you’ve already made a nice profit, don’t be afraid to take some money off of the table. There is an old saying, “if you don’t take your profit, the board will.” One of the biggest mistakes a trader can make is staying in a position too long, hoping for the home run. Babe Ruth hit 714 home runs in his career, but also struck out 1,330 times.

7. Reversing your position. If your position is wrong, avoid the temptation of getting out and taking the other side. It is better to get out completely and re-evaluate the market. Don’t run the risk of getting whipsawed by losing as the market moves against you and losing more when the market turns against you.

8. Trading too many markets at once. Don’t try to be the “Jack of All Markets” as you will end up being

“The Master of None.” By trying to trade too many different markets at once, you won’t have the feel or the information to make good decisions. Instead limit yourself to one or two markets and specialize in them.

9. Waiting too long to “pull the trigger.” People who are indecisive or procrastinators make poor traders. The best traders are the ones who respond quickly and automatically to what the market tells them to do. Those who do not have the courage and conviction to act quickly on the market information will not make good traders.

10. Not doing your homework. Trading can be demanding. The best traders are the ones who have made a commitment to do what it takes to become a success. They study charts and fundamentals on a daily basis.

Corn analysis

So far, this year’s sales are outpacing last year’s figures, 563 million bushels versus 510 mb. The U.S. needs to export 32.7 mb each week to reach the USDA forecast. The USDA lowered good-to-excellent crop ratings by 1 percentage point, to 68 percent.

Crop ratings continue to closely trace the record crop yield year of 1994. However, in 1994, crop ratings improved from August into the harvest. This year, ratings have decreased during September.

Soybeans analysis

This year’s export forecast is far outpacing last year’s sales profile, 690 mb versus 366 mb. The U.S. only needs to export 11.8 mb each week to reach the USDA forecast. Like corn, soybean g/e ratings were moved one percentage point lower to 67 percent.

This year’s soybean crop continues to be the highest rated soybean crop along with 2004, however ratings have been falling this month, while ratings improved during 2004. This may indicate to the trade that the yield projections we have seen from private forecasters and the USDA are as large as the trade may actually see.

The growing season is effectively coming to a close. While scattered, there have been some early yield reports from producers in Iowa where beans have been ranging from 55 to 66 bushels per acre.

Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.

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