December 11-12-2016:ITPM SENIOR TRADING MENTOR RAJ MALHOTRA INTERVIEW ON WHY

TRADERS FAIL.

1. Cutting winners too soon

This is a very classic mistake. Young traders are too quick to take a small profit when
a position starts to go their way and miss the really big move. Be patient with winning
trades.

Apple is a great example. If you had made a $10,000 investment in Apple in July
2002, nine months after the release of the first iPod, you would be a millionaire today.

However, how many people do you know who became millionaires trading Apple?
Apple is an example of a company that everyone knows about; its explosion was in
front of everyone's eyes; but it remained under owned by the public.

You may have heard ridiculous phrases like, "It's had such a big move, it can't go up
anymore." In fact, when the stock was trading around $700 (before splitting 10 for 1),
I heard more Apple bears than bulls.

Perhaps, it's human nature to take small gains. However, to really make a lot of
money trading, you should try to be very profitable on a few trades, as opposed to
trying to be slightly profitable on every call. After all, at the end of the day, there is
only one way to keep score.

2. Letting losers run

This is the second classic mistake. Young traders fall in love with losers and never get
out. Be impatient with losing trades! The key on losing trades is to set hard stop losses
and move on.

Novice traders look for excuses on why the market is wrong and hold onto these
fleabags. Remember the market is always right! You will hear excuses like "The stock
is down so much, it can't go lower." Well it can go lower! Look at classic examples
like Blockbuster, Polaroid or Donald Trump's popularity among Mexican-Americans.

Perhaps, inexperienced traders hesitation to cut losers stems from the fact that it is
admitting defeat. Get over it! Sometimes the best trade is to get out early to only lose
5 percent, when holding too long costs you 50 percent.

3. Doing the consensus trades

One mistake young traders make is falling in love with consensus trades. If everybody
loves the trade, it must be good right?

Getting into consensus trades is like playing a game of three-card monte. It looks so
easy, you make a few bucks and then all of a sudden, you lose all your money and
can't figure out what happened.

Consensus trades usually mean that all the news is priced in. Then, what happens is
that sentiment reverses and inexperienced traders never react quickly enough. They
tend to get stopped out at the worst possible time, lose all the money they made, and
claim the game is rigged (just like three-card monte).

4. Listening to Wall Street geniuses

Warren Buffett famously said, "Derivatives are financial weapons of mass

destruction" in Berkshire Hathaway's 2002 annual report. Last month he stated, "In
my view, derivatives are financial weapons of mass destruction that … are potentially
lethal."

I traded long-term S&P 500 options for Bank of America from 2002-2009, and the
biggest seller of long dated S&P 500 puts was ... Berkshire Hathaway!! The man
warning us about the nuclear threat of derivatives was enabling the massive
destruction of the global markets.

That's like President Obama warning about the threat of a nuclear Iran, then enabling
them to build a bomb that could cause massive destruction. (Oh wait,
that is happening.)

So why, on one hand, is Warren Buffett warning about the dangers of derivatives and
then selling naked puts? Possibly to deceive sell-side traders into thinking they know
his direction, when he is actually doing the opposite.

The point is that, when listening to these Wall Street icons, they are saying things
publicly for a reason and it's not to your benefit. So, next time you hear Carl
Icahn or Bill Ackman publicly talking about their market views, be careful!

5. Bad time-management habits

There are tens of thousands of stocks in the U.S. alone. There are stock markets in
every major country, Along with bond markets, currencies, commodities, etc. With so
much information, every good trader works hard but they have to work smart.

For example, if a company looks attractive, figure out what it does! The best place to
figure that out is its website. Working smart means keeping it simple. Get the
important information as quickly as possible and forget the noise.

Time management also means forget about past trades. The future is in front of you.
Worrying about what you coulda, shoulda done, is time wasted. And time means
money.

6. Not focusing on your strengths

A common mistake most inexperience traders make is trading outside their comfort
zone. I often see young traders have a little success trading U.S. stocks, then decide
they can also trade brent crude futures.

Stick to what works. Work really hard at what you are good at. That's how you
become great at something. You would never see a great stock investor like Peter
Lynch stop mid-career to go trade short- term Greek debt. Just like you wouldn't see
Michael Jordan quit basketball mid-career to go play baseball. (OOPS!!)

The point is, when you get good at a particular style of trading, get great at it! You
can't be great until you are good. That's how you build a long-term career at this.
Focus on your strengths.