Here are few notes on some of the biggest, and most common problems that prevent traders from ever becoming profitable. I’ve had most of these problems myself at some point, and I always have to be on my guard against some of them. Do any of these hit close to home for you?
- You view losing money in a trade as a painful experience and/or failure and you go into denial when a position starts losing value. Ultimately if it keeps going against you, you end up taking a massive loss. And then, when a position becomes slightly profitable you become extremely afraid to lose the profit so you take small win. No one ever went broke taking a profit? Not true. Taking small profits and large losses is a sure way to destroy a trading account.
- You believe if you can just “figure out the market” then you can avoid all those painful losses.
- You absolutely hate taking responsibility and you will complain to the world that that huge loss you just took was not your fault. “It was that Trump tweet” “It was the Fed!”. This is nothing by that delicate Ego of yours trying to protect itself. Poor Ego. And it will ruin your account faster than you can say “victim mentality”. This attitude has no place in trading, or (more importantly) in life. This is where trading can be a huge opportunity for personal growth.
- You make trading decisions based on what you hear in mainstream media. Mainstream media is the propaganda arm of those who fleece. Is this really where you’re getting your information?
- You are trading the way your broker tells you to trade, and that involves placing as many trades as possible. Shocker! Please, put on your common sense hat and consider the conflict of interest.
- You are trading short term price action using oscillators and momentum indicators. I honestly have no idea why people’s minds go here first, but I did this when I first started, too. We want to believe so badly!
- You do not understand the actual risk of the positions you hold and you are taking far too much risk.
- You are using stops to trade short term price action while you are also using too much leverage for your account size. Your stops are within normal market noise and you get stopped out even when you were right on direction because the losses, which should be expected, cause too big a drawdown in your account.
- You add to losers and cut from winners, never letting a big winner develop.
- You are trading far too often
