Lesson 6: Common Mistakes

Every mistake in this lesson has cost me money. Learn from these so you don’t have to pay the same tuition I did. Avoiding these mistakes alone will put you ahead of 90% of new traders.

Mistake #1: Chasing Trades

You see a stock rocketing higher. FOMO hits. You jump in — usually near the top. The stock reverses. You lose.

This happens to every new trader.

The FOMO Pattern

1. Stock rallies dramatically while you watch from the sideline
2. You feel like you’re missing out
3. You jump in WITHOUT a planned entry
4. The stock reverses moments after you enter (because institutions are taking profits)
5. You take a loss on a trade you shouldn’t have been in

The Antidote

There is always another bus coming.

Missing a move doesn’t hurt. Chasing into the next bad trade DOES. The market opens 252 days per year. New opportunities arise daily. Missing one is irrelevant.

Mantra: “I trade my setup, or I trade nothing.”

If you don’t have a planned entry point, stop. Don’t buy. Wait for another clean setup.

Mistake #2: Too Many Positions at Once

Holding too many simultaneous positions is a silent account killer. You can’t watch 10+ charts effectively. When the market turns, ALL of your positions lose at once.

Real Scenario

I once had 9 open positions simultaneously. The market turned against me mid-day. Seven of the nine lost money in a single session. The damage was massive — I’d diluted my attention across too many trades.

Position Limits by Experience

• Beginner (first 6 months): Maximum 2-3 positions
• Intermediate (6-12 months): Maximum 4-5 positions
• Experienced: Maximum 5-7 positions

Fewer positions = clearer thinking = better outcomes. Don’t confuse activity with productivity.

Mistake #3: Buying Options That Expire Too Soon

New traders love cheap weekly options. They seem affordable. But they are ticking time bombs.

The Trap

Weekly options expiring in 1-3 days are cheap because they’re about to be worthless. Theta decay accelerates dramatically in the final days. Even if the stock moves in your favor, decay can destroy the option’s value faster than price can help.

The Rule

Minimum 4 days to expiration for buying contracts. Preferably 7+.

Never buy options expiring the next day unless you’re an experienced day trader with a clear, immediate exit plan.

Why Time Matters

Time on your contract is like insurance — it protects you. A trade that needs 3 days to work out cannot succeed with 1 day on the clock. Buy yourself room to be right.

Mistake #4: Buying the Dip When It Keeps Dipping

“Buy the dip” is dangerous advice for beginners. Sometimes a dip keeps dipping.

The Scenario

A stock falls 5%. You think it’s a buying opportunity. You buy calls. Stock falls another 10%. You’re bleeding. You consider buying more to “average down.” Stock falls another 15%. Account destroyed.

The Better Approach

Wait for signs of recovery BEFORE buying.

Signs of a legitimate bottom:

• Price consolidates after the fall (no new lows)
• Higher lows begin forming
• Volume increases on up candles
• Pivot Ribbon begins to twist positive

Cheap doesn’t mean good. A stock that looks oversold can stay oversold for weeks. Wait for actual reversal signals.

Mistake #5: Buying Far OTM with Bad Greeks

Those super-cheap, far-out-of-the-money options look like lottery tickets. They usually are — and lotteries lose.

The Red Flags

• Delta below 0.10
• Volume under 50
• Open Interest under 100
• Bid/ask spread over $0.20 wide
• Implied Volatility extremely high

What Can Happen

You buy a $0.15 option. The stock moves in your direction. You try to sell — but there are no buyers. The bid is $0.02. You’re stuck.

Far OTM options with bad liquidity are almost impossible to exit at fair prices. You can be RIGHT about the direction and still lose money because you can’t sell.

The Rule

Always check the Greeks, volume, and open interest BEFORE buying. If any of these look bad, find a different strike or skip the trade entirely.

Mistake #6: Revenge Trading

You take a loss. You’re angry. You want to make it back IMMEDIATELY. So you increase your size on the next trade to recover quickly.

This almost always ends in a larger second loss.

The Pattern

1. Initial loss ($500)
2. Emotional reaction (need to recover NOW)
3. Double position size ($1,000)
4. Setup isn’t actually clean — you’re not thinking rationally
5. Larger loss ($1,200)
6. Total hole: $1,700 instead of $500

The Protocol

After a full max-loss trade:

• Close your laptop
• Walk away from screens
• No more trades today

Your judgment is compromised after a loss. Your brain is screaming to “fix it.” Resist. The market will be open tomorrow with fresh opportunities and a clear head.

Mistake #7: Ignoring the Broader Market

You spot a beautiful setup on Microsoft. You buy calls. SPY is down 2% on the day. Microsoft drags down with the market despite its great setup. Loss.

The Lesson

No stock is an island. The market drives the majority of individual stock movement. A great setup can fail if the broader market is working against it.

Pre-Trade Market Check

Before every trade, look at:

1. SPY trend (primary market reference)
2. QQQ (if you’re trading tech)
3. VIX (fear gauge — elevated VIX = caution)
4. Sector ETF of your target stock (if trading XOM, check XLE)

If SPY is selling off hard, even perfect single-stock setups often fail. Respect the market.

Mistake #8: No Exit Plan (Hope Trading)

This deserves its own section because it’s the cause of so many blown accounts.

The Mistake

You bought an option. It’s down 30%. You don’t sell because you’re “hoping” it’ll come back. It drops to -50%. You still hope. It drops to -80%. Now you’re emotionally invested. You hold to expiration. It’s worthless.

The Truth

You cannot survive the market on hope alone.

When hope becomes your strategy, you’ve already lost.

The Fix

Every trade needs a pre-defined exit plan:

• Profit target (where will you take the win?)
• Stop loss (where will you take the loss?)

Set stop losses automatically so they execute without your emotional interference. This single discipline will save your account more times than you can count.

Mistake #9: Not Keeping a Trade Journal

If you don’t track your trades, you cannot improve. Period.

What to Track

• Date and time
• Ticker, strike, expiration
• Entry price, exit price
• Position size
• Profit/loss
• Reasoning for entry
• Reasoning for exit
• What you did well
• What you could improve

Tools

• TraderSync.com — Free tier available, automated
• Excel/Google Sheets — Manual but customizable
• Physical notebook — Old school but effective
• AI integration — I used AI to integrate my notion journal and Webull account

Review your journal weekly. Identify patterns in your winners AND losers. Your journal is the fastest feedback loop you have.

Mistake #10: Trading Without Rest or Breaks

Trading demands mental sharpness. Tired, hungry, or stressed traders make worse decisions.

Signs You Should Step Away

• You’ve been staring at charts for hours
• You feel anxious or desperate
• You’re making impulsive decisions
• You’re revenge-chasing losses
• You’re FOMO-chasing winners

Close the laptop. Take a walk. Eat. Sleep. The market will be there tomorrow. Your account balance is correlated with your mental state. Protect both.