The 4 Biggest Reasons Why Most Traders Fail And How You Can Avoid It

Now I’ll be honest with you…

I can’t help you with your money problems.

I can’t turn you into a millionaire trader.

I can’t help you turn $1000 into $100,000 in 2 weeks.

You might be wondering…

“So why the heck should I listen to you?”

Well, I could improve your trading results.

This means…

If you’re a losing trader, I could help you stop the bleeding.

If you’re a breakeven trader, I could help you get to profitability.

If you’re a profitable trader, then what are you doing here?

But, don’t take my word for it.

Here are what other traders have to say…

Anyway…

Today’s email isn’t about me.

Rather it’s about you, and how you can avoid the top 4 mistakes that almost all new traders make.

So, let’s get started…

#1: You listen to opinions

In 2009, I started trading in the financial markets.

I was new to this business so I did what most traders do…

Lurked around a stock trading forum with the hopes of gaining some tips and insights.

Every morning, I’ll read the forum to catch up on the things I’ve missed from the night before.

But today was different.

I noticed there’s a new thread in the forum.

In that thread, a guru did some technical analysis on a stock called, China Sports.

He drew an upward trendline on the stock price and was bullish on it.

I thought to myself…

“Wow, he seems to know what he’s doing.”

So, what did I do?

I bought China Sports, of course!

The next day, the stock rallied and I said to myself…

“Damn, trendline works like magic!”

However, over the next few days, the price of the stock declined and started moving lower.

It went back to my entry price and eventually, put me in the red.

I wondered what’s happening to the stock.

So, I quickly went back to the forum and check out the latest analysis on the stock.

Then something caught my attention.

The upward trendline I saw previously was “shifted lower”.

I didn’t think too much about it as the guru was still bullish on the stock—so I held on.

Over the next week, the price of the stock collapsed even more—I was down 30% from my entry price.

And every day, I was at the forum checking out the latest analysis of the guru.

Then I realized one thing…

His upward trendline was “shifting lower” as the days go by.

Eventually, the stock price tanked so much that his upward trendline became almost flat.

I had no choice but to cut my loss and call it quits.

The lesson?

Never trust the opinion of others—it puts you in a position of weakness.

#2: You "play" with indicators without knowing what it means

Here’s the truth:

Indicators are derived from price.

This means the values on your indicator are “created” by applying a mathematical formula from the price on your charts.

You’re probably wondering:

“What’s the problem?”

It’s this…

Indicators are “manipulated” to form bullish or bearish signals.

Let me ask you…

Have you noticed that your RSI indicator shows a bearish signal, but your MACD shows a bullish signal — at the same time?

So, which indicator do you trust?

Well, you’re stuck because now you have conflicting signals.

So, what’s my point?

Stop toying with indicators, it doesn’t give you an objective view of the markets.

Without an objective view of the markets, you can’t make the right trading decisions.

Without the right trading decisions, you’ll find yourself losing consistently in the markets.

Now don’t get me wrong.

I’m not saying indicators are bad and you can't use them. But they shouldn’t be the basis of your analysis.

#3: You rely on fundamentals to make your trading decisions

Here’s a fact:

The market can go up on bearish news and it can go down on bullish news.

And often, by the time the news is out… it’s probably too late to enter.

Now you might be thinking:

“You should combine both fundamental and technical analysis.”

Okay.

But what if your technical is bullish and fundamental is bearish.

Now you’re stuck, AGAIN.

So, what now?

Well, here’s a secret for you…

Often, when the fundamentals are bullish, it would be reflected in the price.

This means the market is in an uptrend when the fundamentals are bullish (and in a downtrend when the fundamentals are bearish).

Here’s an example:

As you can see, NZD/USD is in a downtrend even before the central bank cuts interest rate.

So, does it mean technical analysis is better?

Yes, at least in my opinion.

Because when you’re wrong, you have your stops in place to cut your losses.

But if you rely on fundamentals…

By the time the “bad news” is out, the market had collapsed and you’d lost a huge chunk of capital.

So here’s the deal:

If fundamentals can’t accurately predict what the markets will do and it’s a horrible risk management tool, then what use is there?

#4: You subscribe to a signal service

Now here are 3 reasons why I don’t believe in signal service and I never will…

1. 99.9% of these systems don’t work at all

Here’s the deal…

The “amazing” results you see from these systems are curve-fitted.

This means it finds the best parameters to fit the historical data so you get a nice-looking equity curve.

Now, it looks good on hindsight.

But it’s a disaster when applied to the real world of trading.

2. The market is always changing

Now… perhaps you might be lucky enough to chance upon a signal service that works.

But here’s the thing:

The markets are always changing.

It moves from low volatility to high volatility, from range market to trending market, etc.

So…

Your signal service might work for a while.

But when the market conditions change—it's game over.

3. You’re not in control of your trading

Now when these systems fail, it’s easy to point the blame at others.

And it’s the last thing you want to do because…

If you blame others, it means you’re not taking 100% responsibility.

If you don’t take 100% responsibility, you are giving up your power to change.

If you give up the power to change, you’ll never improve for the better.

So the bottom line is this…

Indicators, news, and opinions will not make you a consistently profitable trader.

So, what should you do?

I'll tell you more in my next email...