Don't Make These Stock Trading Mistakes
Stockscores Foundation for the week ending May 18, 2026
In this week's issue:
In This Week’s Issue:
- Market Outlook – The Law of Upticks
- This Week’s Market Minutes video – Hot Stocks are Back! How to Find Them
- Trader Training – Don’t Make These Stock Trading Mistakes
- Strategy – High Dividend Payers
Market Outlook – The Law of Upticks
The market indexes are hitting new highs but most stocks have not participated in the strength. Instead, the gain in the indexes has been driven by a handful of large cap, predominantly technology, stocks. However, when indexes move to new highs, investors start to be more optimistic and last week we saw an increase in the number of stocks making significant gains. Short term traders should have more to do now.
This Week’s Market Minutes Video – Hot Stocks are Back! How to Find Them
After a quiet few months, hot stocks made a comeback last week. In this video, I show how I find them early. Then, my analysis of the overall markets to determine whether a stock market crash is imminent. Finally, a look at the day trade of the week on PIII.
CLICK HERE TO WATCH ON YOUTUBE
https://youtu.be/de4Gas4eag4
Commentary – Don’t Make These Stock Trading Mistakes
Trading is a simple business, but it is not an easy one. Whether you are holding positions for months or trading the market for minutes, success comes from doing the right things consistently. Most traders do not fail because they lack intelligence, information, or motivation. They fail because they repeat the same common mistakes until their capital, confidence, or discipline is gone.
The good news is that these mistakes are avoidable. Traders who learn to recognize them, build rules to prevent them, and develop the discipline to follow those rules give themselves a much better chance of long-term success.
Here are four of the most common mistakes traders make.
1. They Lack a Proven Trading Strategy
Many traders enter the market with an opinion instead of a strategy. They buy because a stock “looks good,” because they heard a story, because the news is exciting, or because they feel like they are about to miss out. That is not trading. That is guessing.
A trading strategy must define exactly what creates an opportunity. It should answer questions such as: What market conditions must be present? What does the chart need to show? Where is the entry? Where is the stop? Where is the profit target? What makes the trade worth taking?
Most importantly, the strategy must be tested. A trader needs to know that the approach has a positive expected value over a large sample of trades. That does not mean every trade will work. It means that, over time, the winners are expected to more than pay for the losers.
Mark Douglas, author of Trading in the Zone, wrote that a consistent winner “objectively identify my edges” and “predefine the risk of every trade.” That is the foundation of professional trading: know your edge before you take the trade, and know your risk before the outcome is known.
Without a tested strategy, the trader is left to react emotionally to every price move. With a tested strategy, the trader has a decision-making framework. The market may still be uncertain, but the trader’s process is not.
2. They Use Poor Risk Management
Poor risk management is the fastest way to turn a small mistake into a big problem. Most traders do not lose because they are wrong. Being wrong is part of trading. They lose because they are wrong with too much size, or they refuse to accept the loss when the trade proves them wrong.
Successful traders plan to lose. That may sound negative, but it is actually one of the most positive habits a trader can develop. Before entering a trade, they determine the price level that proves the trade idea has failed. That level becomes the stop loss. From there, position size is calculated so that the loss, if it happens, is acceptable.
The stop should not be based on how much pain the trader can emotionally tolerate. It should be based on the chart and the structure of the trade. Once the stop is known, the number of shares can be calculated so that the dollar risk fits the trader’s plan.
Paul Tudor Jones famously said, “The most important rule of trading is to play great defense, not great offense.” That is a powerful reminder that trading success is not about trying to make as much money as possible on every trade. It is about staying in the game long enough for your edge to work.
Another well-known Paul Tudor Jones rule is, “Don’t ever average losers.” Averaging down often feels logical because the stock is cheaper. In reality, it usually means the trader is increasing risk in a trade that is already not working. That is not discipline. That is hope.
Good risk management accepts losses quickly, keeps them small, and prevents any one trade from doing major damage.
3. They Overtrade
One of the hardest skills in trading is learning when not to trade. Many traders think more activity means more opportunity. Often, it means more mistakes.
The market will always offer something that looks promising. There will always be a stock moving, a headline creating excitement, or a chart that looks like it could work. But successful trading is not about taking every possible trade. It is about taking the best trades.
A strong strategy should have rules that filter out weak opportunities. The trader’s job is to be fussy. If the stock does not meet all of the rules, do not take the trade. If the setup is almost right, it is not right. If the reward does not justify the risk, pass. If the trade requires imagination to make it look good, it is probably not good enough.
Overtrading often comes from thinking about what might happen instead of what will probably happen. A stock might explode higher. A stock might be the next big winner. A stock might recover from weakness. But profitable traders do not build decisions around what is possible. They focus on what is probable.
The trader who waits for quality will trade less but often make more. Fewer trades mean fewer commissions, fewer emotional decisions, fewer random losses, and more focus on the opportunities that truly fit the plan.
Patience is not inactivity. Patience is discipline.
4. They Make Emotional Decisions
At the exact moment a trading decision must be made, emotions are often at their strongest. Fear appears when the stock pulls back. Greed appears when the stock runs. Hope appears when the trade is losing. Regret appears after a missed opportunity. These emotions are normal, but they are dangerous when they take control of the decision.
Emotional trading usually leads to breaking rules. The trader moves a stop because they do not want to lose. They buy too late because they fear missing out. They sell too soon because they are afraid to give back a profit. They take a poor setup because they are bored. They hold a loser because they want to be right.
Ed Seykota is widely quoted as saying, “Win or lose, everybody gets what they want out of the market.” The meaning is important. Some traders say they want profits, but their behaviour shows they want excitement, action, validation, or the comfort of avoiding a loss. The market reveals what a trader truly values through their decisions.
The solution is to remove as much subjectivity as possible. A written checklist is one of the best tools for doing that. Before taking a trade, go through the strategy rules one by one. Does the trade meet the setup requirements? Is the entry valid? Is the stop clear? Is the position size correct? Is the reward worth the risk? Is the market environment supportive?
A checklist slows the trader down. It forces the decision to be systematic rather than emotional. It turns a vague feeling into a yes-or-no process.
The best traders still feel emotion. They simply do not let emotion make the decision.
The Common Thread: Process Over Prediction
These four mistakes are connected. A trader without a proven strategy is more likely to overtrade. A trader who overtrades is more likely to make emotional decisions. A trader making emotional decisions is more likely to ignore risk. Once risk is ignored, one bad trade can undo weeks or months of progress.
Successful trading is not about predicting every move correctly. It is about having a process that gives you an edge, managing risk when you are wrong, waiting for the best opportunities, and following your rules when emotions are high.
The market rewards discipline over excitement. It rewards patience over activity. It rewards risk control over bold predictions.
To become a better trader, start by avoiding the mistakes that hurt most traders. Trade a tested strategy. Limit your losses. Be selective. Use a checklist. Make decisions based on probability, not emotion.
Do that consistently, and you will already be ahead of most traders.
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This week, I focused on a scan for longer term traders seeking stocks that pay dividends. I scanned for Canadian stocks yielding 6% or more, above $5, with a Sentiment Stockscores of 60 or higher. I then inspected the charts to look for stocks with good upward momentum and decent liquidity. Here are two that I think stand out.
1. T.IPOT.IPO - a favorite of mine, this stock has performed really well for me over the past year. A recent pullback to the trend line has allowed the stock to build a base of support and is now building optimism toward a new breakout. Support at $14. Historical dividend yield at 6.17%.
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2. T.FRUT.FRU pay 6.12% and is building a good pattern under resistance at $18, watch for a break through that level as a signal it wants to go higher. Support at $16,
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