Don't Let These 5 Traps Ruin Your Trading
Stockscores Foundation for the week ending August 11, 2026
In this week's issue:
In This Week’s Issue:
- Market Outlook – New Highs
- This Week’s Market Minutes video – Time to Buy Gold (Again)?
- Trader Training – Don’t Let These 5 Traps Ruin Your Trading
- Strategy – Positive Weekly Patterns
Market Outlook – New Highs
The S&P 500 (large caps) broke out to new highs last week and the Russell 2000 (small caps) broke its pullback. We saw a noticeable move in a wide range of stocks, indicating that optimism is returning after a quiet July. Gold stocks made a good upside break as the pullback in Gold was broken. Trading action quiet but with consistent profitable opportunities each day.
This Week’s Market Minutes Video – Do This to Fix Your Trading Strategy
Is it time to buy gold again? After a major move in precious metals, this week’s Stockscores Market Analysis takes a fresh look at Gold to determine whether the setup is offering another buying opportunity—or whether investors should remain patient.
I also break down the bigger market picture, including the trends and important signals developing across stocks, commodities, currencies and bonds. Understanding how these markets interact can provide valuable clues about where money is flowing and what could come next.
Plus, we finish with the Stockscores Trade of the Week: AMIX, reviewing the price and volume characteristics that created the opportunity and the lessons traders can take from the setup.
https://youtu.be/YfsstZHirqI
CLICK HERE TO WATCH ON YOUTUBE
Commentary – Don’t Let These 5 Traps Ruin Your Trading
One of the biggest challenges in trading is that bad decisions often feel perfectly reasonable in the moment. We know that successful trading should be systematic. A trader should have a well-tested strategy, understand why that strategy has positive expected value, and then apply the rules consistently without bias or deviation.
That is the ideal, but the problem is that we are human. Money creates emotion. Recent experiences influence our judgment. Excitement makes us see opportunity where there may be none. Frustration makes us impatient, and fear of missing out encourages us to abandon discipline. As a result, traders often take trades not because their strategy tells them to, but because some other motivation has taken control.
That is dangerous because the moment you start taking trades for reasons outside your strategy, you are no longer trading your edge. You are improvising.
A common example is taking a trade to make back a loss. You lose money on a trade and immediately feel the need to recover it. That desire is natural, but it is also one of the most dangerous motivations in trading. The market does not know that you just lost money. The next stock does not care what happened on your previous trade. There is no reason another opportunity should suddenly become better simply because you are down $500, $1,000 or $5,000.
Yet traders often behave as though there is. They become more aggressive, lower their standards, increase their position size or take a trade they normally would have passed on because they want to recover what they lost. This is often called revenge trading, but it does not always look like anger. Sometimes it is much more subtle. The trader simply feels that they “need a winner.”
That small change in mindset can be enough to distort decision-making. The objective of trading should never be to make back a loss. The objective should be to consistently execute a strategy with positive expected value over a large number of trades. Losses are part of that process. If your strategy wins 60% of the time, roughly four out of every ten trades can still lose. Those losses do not represent failure. They are simply part of the statistical distribution of outcomes.
Another common mistake is taking a trade because it looks like a recent winner. You see a stock make a spectacular move and notice something about the setup that seems to have preceded it. Perhaps the stock broke out of a certain chart pattern, showed unusual volume or had a particular type of price action. You then start looking for another stock that looks the same.
There is nothing wrong with studying strong stocks to generate trading ideas. In fact, that can be one of the best ways to discover potential edges. The mistake is turning one observation into a trading rule without first testing it.
Human beings are very good at finding patterns after the fact. If we look at a successful stock, we can almost always identify something that appears important. The problem is that one example proves almost nothing. Before adding a new setup to your strategy, you need to test it over a large enough sample to determine whether it actually has positive expected value.
How often does the setup occur? What percentage of the trades are profitable? What is the average winner? What is the average loser? Does the setup work in different market conditions? What happens when it fails?
Until you can answer those questions, you do not have a strategy. You have an observation. Observation should lead to testing, testing should lead to rules, and only then should those rules lead to trades.
Profit goals can also push traders into taking trades for the wrong reasons. There is nothing inherently wrong with wanting to make $500 in a day, $5,000 in a month or a certain percentage return over a year. The danger comes when those targets begin influencing individual trading decisions.
The market does not provide opportunities according to your financial goals. Some days may offer several excellent setups while other days may offer none. If you are $300 short of your daily profit target with an hour left in the trading session, the temptation is to start looking harder for a trade.
Unfortunately, looking harder does not create better opportunities. More often, it causes traders to lower their standards. A mediocre setup begins to look acceptable because it might help reach the goal. The same thing can happen over a week, month or year. A trader who is behind their target may start pressing harder, while a trader who has already achieved a strong result may become overly cautious because they are afraid of giving profits back.
In both cases, the profit target is changing behavior. That is not what you want. You cannot control how much money the market gives you today, but you can control whether you follow your rules. A better goal is process-based. Did you take every valid setup? Did you avoid trades that did not qualify? Did you size positions correctly? Did you honor your stops and follow your exit rules?
If you consistently execute a strategy with positive expected value, the profits should be the consequence. Do not chase the consequence. Focus on the process that produces it.
Another trap is taking a trade because of something you read or heard. Markets are filled with information. Social media, newsletters, television, chat rooms, analyst reports, online forums and friends are constantly presenting new ideas. Someone is always talking about the next great opportunity, and sometimes the story sounds incredibly compelling.
A company may have a revolutionary product. An analyst may predict enormous growth. A respected investor may reveal a large position. A message board may be filled with excitement. The temptation is to think, “Maybe I should buy it.”
Before doing anything, ask one simple question: does the trade meet my strategy?
If the answer is no, then the story should not matter. Exciting information is not the same thing as a trading edge. You do not need to completely ignore news or information, because it can help explain why a stock is attracting attention. But there is an important difference between using information as context and using it as a reason to trade.
Your strategy should determine whether you take the trade. The story should not.
Perhaps the most deceptive reason for taking a trade is common sense. A company announces great news, so the stock should go higher. Interest rates fall, so stocks should rise. Oil prices increase, so energy stocks should go up. A company reports record earnings, so buying the stock seems obvious.
The problem is that markets do not always behave according to common sense because markets are not driven only by information. They are driven by expectations.
If everyone already expects excellent earnings, an excellent report may not be enough to push the stock higher. If investors have already positioned for lower interest rates, the actual rate cut may trigger selling. If a stock has already doubled because traders anticipate good news, confirmation of that news may mark the end of the move rather than the beginning.
This is why traders should be very cautious about overriding their strategy with logic. Your interpretation of what should happen is not the same thing as evidence of what is happening. Price and volume show you what buyers and sellers are actually doing, which is often much more valuable than trying to determine what they should be doing.
One of the hardest lessons in trading is learning to trust a tested process more than your opinion.
Before entering any trade, you should be able to answer one simple question: why am I taking this trade?
The answer should connect directly to the rules of your strategy. Not because you lost money earlier. Not because another stock recently made a huge move. Not because you need to reach your monthly goal. Not because someone gave you a great tip. Not because the trade seems logical.
You should take the trade because it satisfies the conditions of a strategy that you have reason to believe provides positive expected value.
That distinction is enormously important. Successful trading is not about predicting every move, having the smartest opinion or finding a way to make money every day. It is about repeatedly putting capital at risk when the probability and potential payoff justify doing so.
A good trading strategy does more than identify opportunities. It also protects you from yourself. Rules prevent frustration from turning into revenge trading. They prevent excitement from becoming impulsive trading. They stop financial goals from making you force opportunities, compelling stories from pulling you into trades without an edge, and personal opinions from becoming more important than market behavior.
This is why consistency matters so much. Every time you take a trade outside your strategy, you are essentially saying that your feelings or opinions are more reliable than the process you worked to develop.
Sometimes that impulsive trade will make money, and that can actually make the problem worse. A bad decision that produces a good outcome teaches the wrong lesson. Trading is full of situations where poor decisions get rewarded and excellent decisions result in losses.
That is why you cannot judge the quality of a trade solely by whether it made money. A good trade can lose and a bad trade can win. The quality of the trade should be judged by whether it followed a sound process.
Before clicking the buy button, consider what is really motivating you. Would you take this trade if your previous trade had been profitable? Would you take it if you had already reached your profit target for the month? Would you take it if nobody had told you about the stock? Would you take it if you had not just seen a similar stock make a huge move?
Most importantly, does the trade actually meet the rules of your strategy?
If the answer is yes, take the trade according to your plan. If the answer is no, let it go.
There will always be another opportunity. The market will continually tempt you to abandon discipline, but your job is not to participate in every move. Your job is to identify the opportunities where you have an edge and execute them consistently.
The traders who survive and prosper over the long run are not necessarily the ones with the best predictions. They are the ones who become very good at doing the right thing for the right reason.
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This week, I scanned the market for stocks making strong gains over the past 10 days and with a Sentiment Stockscore of 60 or higher. Here are three good weekly charts worth considering for longer term trades.
1. IOVAA break through $5 resistance sets the sttock up for the next leg up. Position trade with support at $4.
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2. V.CGNTStrong break to new highs this week, position trade with support at $0.73.
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3. BLMNBottom fishing pattern with a break up from a rising bottom after the downward trend line was broken in May. Position trade with support at $8.
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