The world of trading can be unforgiving, especially when you’re new to the game – just ask the 90% of traders that blow out their bankroll within the first six months. Clearly, it’s not for the faint of heart, and Zak Westphal, co-founder and CEO of StocksToTrade, knows this better than anyone.
For more than a decade, Zak Westphal has made it his personal mission to help educate and inform traders at every level through his platform and educational resources. It’s safe to say he’s seen just about every mistake in the book. Now, he wants to spare others the pain by passing on the lessons he wishes he knew starting out.
In this post, Zak Westphal is sharing the top five costliest errors he sees traders make time and time again when they’re just getting their feet wet. Whether you’re just dipping your toes in or have a few years under your belt, his insights can save you from some mighty expensive learning experiences that might sink your aspirations before they really take off.
1 Chasing Every Hot Trend
“It’s human nature to feel that fear of missing out when you see assets like crypto or meme stocks erupting in real time. I get it – those vertical climbs are hard to ignore. But chasing that kind of extreme volatility without the proper filters in place is just asking for trouble. I can’t tell you how many new traders I’ve seen buy at the absolute peak without any plan for when gravity kicks in. Before you know it, they’ve lost 50% in a matter of days, if not faster,” says Zak Westphal.
No matter what everyone else is chasing – whether it’s the sizzling crypto craze or penny stocks on a tear – it’s important to have a level head and a plan rather than just follow the herd based on how you’re feeling. FOMO can be dangerous when left unchecked. Chasing vertical climbs late in the move carries tremendous downside risk.
It’s not easy to sit on your hands while people are posting about their gains. But having some discipline and assessing things logically rather than emotionally can save you a world of hurt. No one ever went broke by not taking a trade.
2 – No Concrete Loss Limits
“New traders often fail to set clear loss limits before entering a trade, instead letting emotions dictate their decisions. They have no automated stops in place, no risk management rules – just a loose idea of where they maybe, might consider exiting if things go south. But the markets don’t care about your feelings. Before you know it, that lack of conviction turns a 5% dip into a 20% plummet as panic sets in. Failing to predefine and automate your loss parameters is a recipe for financial and psychological havoc,” warns Zak Westphal.
We’ve all been there – desperately clinging to a losing trade long after the writing was on the wall. Or panicking at the first sign of drawdown and bailing on something with legs. Emotions will run you aground if you let them call the shots. But with a predefined risk threshold, your trades can play out objectively according to your plan.
The financial and psychological toll of chasing losses can break even seasoned traders. So before diving in, do the homework to define your risk upfront. It may not be as exciting in the moment, but it’s the difference between surviving to fight another day and becoming a warning story for others.
3. Overcomplicating with Too Many Tools
“While I am a big advocate for algorithms and the use of automated tools, new traders often think complexity equals profitability when it comes to market analysis, and end up complicating things beyond recognition. They hear about a new indicator or algorithm and instantly try jamming it into their trading strategy, believing more sophisticated methods must produce better returns. But in pursuing every shiny new toy, they lose sight of the core essentials and get overwhelmed by contradictory signals and settings,” says Zak.
Zak’s advice really embodies the idea that sometimes, keeping things simple is the smartest path forward. Many new traders fall into the trap of thinking they need a complex system with all the bells and whistles to succeed. But in reality, that kind of overengineering often just muddies the waters instead of clarifying things.
When you’re first starting out, it’s easy to get lost in all the different indicators, algorithms, and data points floating around. But really focusing on the core fundamentals – things like support/resistance, trends, and volume – will take you much further than a kitchen sink approach. Less is truly more in trading, as in many things.
4. Trusting Unqualified Influencers
“A lot of the time, beginner traders put too much trust in financial influencers because of their seeming confidence and success. They follow charismatic personalities peddling strategies without questioning actual qualifications or proven results. Novices just want confirmation that they made the right move rather than truthful feedback – even if it means ignoring red flags as losses hit their account. But surrounding yourself with yes men feels good until that echo chamber blinds you to reality,” explains Zak.
Many new traders, eager to learn, may gravitate towards influencers focused more on marketing than merit. And it’s easy to see why – flashy promises make for engaging content. But flashy doesn’t always mean effective. Without experience to filter hype from help, it can be hard to separate the wheat from the chaff.
As in all things, facts matter more than flashy facades. Zak’s experience underscores the value of vetting advice thoroughly before committing capital. With grounded diligence, traders can avoid the self-sabotage of following unqualified influences due simply to clever self-promotion. Substance over style serves investors well in every market.
5. Not Honoring Your Trading Personality
“Each trader has an inherent personality and preferences for how they approach markets. Some thrive on rapid scalping while others prefer longer positional swings – and everything in between. But new traders often force themselves and their strategies into boxes not aligned with who they are. Maybe they feel compelled to day trade even with a full-time job or force a complex algorithmic approach when they crave simplicity. Not honoring your inherent trading tendencies sets the stage for failure and frustration down the line as you try jamming square pegs into round holes,” says Zak.
At the end of the day, even more than skill or smarts, finding what works for you and your unique trading personality is what drives real results. Newbies often feel a lot of pressure to mimic strategies without taking the time for self-reflection first. But fighting against your innate style will just lead to killing your performance and burning out from overcomplicating everything and having unrealistic standards.
Wrapping Up
The markets constantly evolve, but human psychology remains the same. As Zak Westphal shared from experience, common amateur pitfalls like chasing hype, lacking risk controls, overcomplicating, blindly following, and not honoring preferences will continue tripping up newcomers. By internalizing these lessons, tuning out noise, and focusing on simple proven strategies aligned to your personality, you can avoid the mistakes that consume most and instead join the elite group who thrive in this complex arena.
