#1. Failure to have a trading plan in place before a trade is executed. Without a specific plan, a trader does not know, among other things, when or where he will exit the trade or how much money may be made or lost. Traders with no predetermined trading plan are flying by the seat of their pants, and that’s usually a recipe for a “crash and burn.”

#2. Inadequate trading assets or improper money management. It does not take a fortune to trade the stock or futures markets successfully. Traders with less than $10,000 in their trading accounts can and do trade successfully. And traders with $50,000 or more in their trading accounts can and do lose it all in a heartbeat. Part of trading success boils down to proper money management and not gunning for those high-risk “home-run” type trades that involve too much capital at one time.

#3. Expectations that are too high, too soon. Beginning traders who expect to quit their “day jobs” and make a good living trading in their first few years are usually disappointed. You don’t become a successful doctor or lawyer or business owner in the first couple of years of the practice. It takes hard work and perseverance to achieve success in any field of endeavor — and trading is no different. Trading markets is not the easy, “get-rich-quick” scheme that a few unsavory characters make it out to be.

#4. Failure to use protective stops. Using protective buy or sell stops upon entering a trade provide a trader with a good idea of how much money he or she is risking on that particular trade, should it turn out to be a loser. Protective stops are a good money-management tool, but they’re not perfect. There are no perfect money-management tools in futures trading.

#5. Lack of “patience” and “discipline.” While these two virtues are overworked and very often mentioned when determining what unsuccessful traders lack, not many will argue with their merits. Indeed: Don’t trade just for the sake of trading or just because you haven’t traded for a while. Let those very good trading “setups” come to you, and then act upon them in a prudent way. The market will do what the market wants to do — and nobody can force the market’s hand.

#6. Trading against the trend — or trying to pick tops and bottoms in markets. It’s human nature to want to buy low and sell high (or sell high and buy low for short-side traders). Unfortunately, that’s not a proven means of making profits in futures trading. Top-pickers and bottom-pickers are usually trading against the trend, which is a major mistake.

#7. Letting losing positions ride too long. Most successful traders will not sit on a losing position for very long. They’ll set a tight protective stop, and if it’s hit, they’ll take their losses (usually minimal), then move on to the next potential setup. Traders who sit on a losing trade “hoping” the market will soon turn in their favor are usually doomed.

#8. “Overtrading.” Trading too many markets at one time is a mistake — especially if you are racking up losses. If losses are piling up, it’s time to cut back on trading, even though the temptation is to make more trades to recover the recently lost assets. It takes keen focus and concentration to be a successful futures trader. Having “too many irons in the fire” at one time is a mistake.

#9. Failure to accept complete responsibility for your actions. When you have a losing trade or are in a losing streak, don’t blame your broker or someone else. You are responsible for your own success or failure in trading. You make the decisions. If you feel you are not in firm control of your own trading, then why do you feel that way? You should make immediate changes that put you in firm control of your own trading destiny.

#10. Not getting a bigger-picture perspective on a market. One can look at a daily bar chart and get a shorter-term perspective on a market or stock trend. But a look at the longer-term weekly or monthly chart for that same market can reveal a completely different picture. It is prudent to examine longer-term charts for that bigger-picture perspective when contemplating a trade.

Previous: Gartman’s Rules of Trading

I really don’t see that many accredited investors having so much exposure to daily weather risk that they’ll feel the need to hedge at prices they’ll assume imply negative expected value (given that both Weather Bill and the hedgies they offload risk on need their pounds of flesh).

I did that on day one, but I made the mistake to put the deep link into the text body (and I wrote it in HTML so it would be clickable –a stupid idea). Of course, my comment was “held for moderation”, because the machine (blogging software Word Press and plugin Askinet) feared that I was a spammer.

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#2. One interesting additional comment from a retired business owner:

PJN: I used to own 30 golf course and clubs. This would have been highly attractive, as weather was a principal driver of our economics. We bought catastrophe insurance back then, and collected once during a hurricane, but this would allow me to smooth out my ordinary weather fluctuations – and eliminate all those “bad years due to poor weather.”

Since lots of other businesses are subject to weather impacts, this makes a lot of sense – if the company has devised an effective distribution method. Small business owners are hard to get to, and many of them are tech or change averse.

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#3. I have spotted a comment from Texas-based (but of world-wide fame) economist Sam Dinkin:

It’s tough to do a pay to play weather game without creating a security and thereby impinging on SEC’s domain, creating a proposition bet which makes it difficult to shield officers in the US from criminal action, or creating insurance which brings a company to the attention of insurance regulators. I built one at http://www.space-shot.com if you want to play one. It’s a skill tournament.

Hey!!! Sam Dinkin managed to get his comment published even though he inserted a (root) link in the text body. How come?