Common Trading Mistakes to Avoid
Every trader makes mistakes, but learning from common pitfalls can save you significant money and frustration. Here are the most frequent errors new prediction market traders make.
Mistake #1: Chasing Pumps
You see a market suddenly jump from 30¢ to 70¢ and think "I need to get in on this!" By the time you buy, the move is often over, and you're left holding shares at the peak. The smart money already bought at 30¢ and is now selling to you at 70¢.
Mistake #2: Ignoring the Spread
Many beginners don't realize that buying at the ask and selling at the bid means you start every trade at a loss. In illiquid markets, this can be 5-10% of your position. Always check the spread before trading.
Mistake #3: Overtrading
Trading too frequently racks up fees and spreads. Every trade has a cost, even if it's small. Professional traders are selective—they wait for high-probability setups rather than trading every market they see.
The 80/20 Rule
Often, 80% of your profits will come from 20% of your trades. Focus on quality over quantity. Wait for the trades where you have a genuine edge.
Mistake #4: Not Having an Exit Plan
You buy shares at 40¢ thinking they'll go to 80¢. They hit 75¢, and you get greedy waiting for 80¢. Then news breaks, and they crash to 20¢. Always have a profit target and a stop-loss level before you enter a trade.
Mistake #5: Emotional Trading
Trading based on what you want to happen rather than what's likely to happen is a recipe for losses. Your political beliefs, favorite sports team, or personal hopes should never influence your trading decisions. The market doesn't care about your feelings.
Mistake #6: Ignoring Resolution Criteria
Always read how a market will be resolved before trading. Some markets have specific criteria that might not match your interpretation. A market on "Will X happen by December 31st?" is very different from "Will X happen in December?"