You’re not perfect.
You’ll make trading mistakes causing you to lose your hard earned money.
Just when you thought you got it figured out…
You made another trading mistake causing you to lose your money, again.
What if you could reduce your trading mistake, would that make you a better trader?
And this is why you’ll want to read every word of this article…
Trading Mistake #1 — Fail to cut your losses that blow up your trading account
I’m sure you’ve heard stories of traders making money consistently, only to lose them all.
Why does this happen?
From a psychological perspective, humans have a trait of wanting to be right.
Thus it is no surprise that most traders would come into the trading arena with this same mindset.
By having the mindset of wanting to be right, you will hesitate in cutting your losses when a trade goes against you.
Because when you cut your losses you are admitting that the market is right, and you’re wrong, creating an internet conflict.
So instead of cutting your losses, you hope and pray that the market eventually goes back in your favor to prove you right.
You may get it once or twice. But eventually, the mother of all losses will hit you and leave you with an empty trading account.
It took me years of pain, frustration, and tons of emotional trading mistakes to learn that trading isn’t about being right. Rather it is about losing small when you’re wrong and winning big when you’re right.
[easy-tweet tweet=”Taking small losses is part of the game. Taking large losses can take you out of the game – Doug Kass” usehashtags=”no”]
Trading Mistake #2 — Going broke taking small profits
When I first started out, I was losing money consistently.
It seemed that the market was always against me.
This leads me to develop a trading mistake, taking my profits too early.
Because I was fearful of losing, I quickly grab whatever profits were available.
Looking at the big picture, I am still a consistent loser.
And here’s why…
Out of 10 trades, I lose 6 and win 4. The trades I lost cost me $600 and the trades I won made me $400.
Netting it would still be a loss of $200.
My profits are not sufficient to cover my losses because I was taking my profits too early.
This trading mistake slowly ate into my trading account and led to a death by a thousand cuts.
Do not exit your trade just because you feel like it, rather exit only when the signal is met.
This ensures you ride your profits to compensate for the little losses that you will incur along the way.
Trading Mistake #3 —Assuming the market is overbought/oversold and be proven wrong, again
The market can remain irrational longer than you can remain solvent – John Maynard Keynes
I grew up in a middle-income family, so we tend to watch what we spend. We buy items when it’s on sale instead of paying full price for it.
When doing groceries shopping, my mum would usually buy fruits when it is on sale, or look for other alternatives.
Thus the principle of buying value and selling dear has been instilled in me since young.
But how does it relate to trading?
In my early days of trading, I wanted to buy low and sell high adopting a similar principle that was taught since young.
So whenever the market trades lower, I would assume that it is oversold and wait for the price to pullback:
And as usual, the pullback never came:
Because I assume the markets are oversold, I tend to miss big moves in the market. This trading mistake has cost me lots of opportunities, heart-wrenching moments, and emotional trading mistakes.
I would always remind myself that the market is never too high to long or too low to short.
Trading Mistake #4 — Analysis paralysis causing you to be a deer in the headlight
Trading is fascinating.
Traders can access an array of indicators, tools and strategies.
Like most traders starting out, I tried to learn every trading strategies I came across.
From price action trading to indicators to harmonic patterns, I’ve tried it all.
Because I trade many strategies at once, a typical scenario I encounter was, having a bullish price action signal, but indicators are telling me the price is overbought.
I get a flood of information rushing to my head, hesitating to pull the trigger.
Do I enter the trade or stay out?
This made me confused. It became very hard to trade due to conflicting signals.
Even if I pull the trigger, it always ends up wherein I make a ton of trading errors.
I decided to strip off the fat and focus on the meat. I abandon all other trading approaches that either weren’t working or didn’t fit my personality.
When I did that, I could analyze the market more clearly and objectively.
[easy-tweet tweet=”All successful traders I have known are one-trick ponies. They do 1 thing, and do it very well – Steve Clark” usehashtags=”no”]
Trading Mistake #5 — Feeling emotional over your trades which doesn’t make sense
I notice a recurring pattern among new traders.
They are usually the ones who will experience emotional highs and lows in their trading.
When the price goes in their favor, you see them cheering on for their trades.
And if the price goes against them, you see them moan and groan.
Imagine the pain you’re feeling when you get stopped out for a loss.
How will you react to the next trading opportunity?
Chances are you will hesitate as you’ve just encountered pain in your previous trade.
You’ve just scored a 4R trade and you’re feeling like a champ.
You’d probably think trading is easy, and start entering trades not part of your trading plan.. and you know what happens next.
Now.. here’s the issue:
These emotional highs and lows could cloud your judgment on the next trade, which eventually produces a lot of trading errors
The good news is that if you survive trading during the initial years, you’ll realize trading is playing out your edge over time.
There is no need to feel emotional over any trades because it doesn’t mean a thing.
Trading Mistake #6 — Micro-managing your trades that leads to premature exit
You could enter your trades on any time frame.
What is wrong, however, is going down to a lower time frame and micromanaging your trade.
This is by far one of the worst trading mistakes out there!
You’re currently short EUR/USD on this 4-hour chart when price retested the 20 EMA and, your stops are above the 50 EMA.
On the next candle, you notice price formed a bearish engulfing candle in your favor.
Your adrenaline is now pumping because the trade is going the way you had planned.
You get a hammer candle that is trading against you.
Your stomach starts feeling a little queasy as your profits are diminishing bit by bit.
You start wondering if you should take profits in case price goes further against you.
You start drilling down into the 15 mins chart for a ‘clearer’ picture.
You notice price forming higher highs and lows against your entry.
This means a possible change in trend. I better take whatever profits I currently have available.
You feel relieved taking your profits.
A few days later you looked at this chart:
If you follow your original plan, you would have made another 600 pips.
So how should you manage the trade?
Here’s the deal:
You should always manage the trade on the entry time frame.
Because this is where your entry signal is given, and your stops are decided, based on the price movement of the entry time frame.
If you always find yourself going down the lower timeframe, then go one timeframe down and see if it’s for you.
It’s all about finding the timeframe that suits you.
And if you still find yourself going down the lower timeframes…
Then I’m sorry to say that you’re already making day trading mistakes.
Trading Mistake #7 — Finding excuses to place a trade because you’re bored
If you want to be consistently profitable, you need to have a consistent set of actions.
You can accomplish this by having a trading plan.
A trading plan is critical to your success as it gives you clear rules on how to engage the markets.
From the entry, position sizing and exits, your trading plan must cover them all.
However when you’re placing trades that is outside of your trading plan, then you’re finding an excuse to place a trade.
Here’s an example:
I am a trend follower and only trade when the markets are trending.
If I were to trade just because the price is at resistance and stochastic is overbought, I’m finding an excuse to place a trade.
What’s wrong with finding an excuse to place a trade?
1. Your trading becomes a mess and you’ll not know which are the profitable trading setups you should focus on.
2. It may lead to overtrading. When you’re over trading, you become emotional and lose objectivity of the markets.
If you read How I Lost 50% Of My Capital Before Turning Into A Profitable Trader, you’d realize that I used to find excuses to place a trade.
I was trading price action, harmonic patterns, and trend-following setups.
What I got in return was confusion, emotional drain, and consistent losses.
Want to know a secret?
The day I focused on one trading approach was the day I felt liberated.
I highly encourage you to find what is working and stick to it.
Do not find excuses to place more trades, as it will do you more harm than good.
Trading Mistake #8 — Blaming yourself over a good trade when you should pat yourself on the back
A good trade isn’t necessarily a winning trade.
A good trade is a trade in which you followed your trading plan, regardless of whether you win or lose.
Trading is about placing good trades after the next for your edge to play out.
You entered a trade and it starts going in your favor immediately.
Then you trailed your stops according to your trading plan. You start feeling good about it, after all, you have some money in the bank!
Slowly you notice the price starts reversing towards your entry and your trailing stop is hit.
When you thought the emotional roller coaster is over, the price starts going back in your favor and your world crumbles.
This is when the little voice in your head starts saying “ahh how stupid I am, if I’m more patient, I could have made another 300 pips!”
It is not possible to consistently predict where the markets will go.
Likewise, it is not possible to consistently exit the market at the exact highs or lows. So do not blame yourself when you have done a good trade, only to watch it go further in your favor.
Because day trading mistakes mean that you don’t follow your rules and not because you’ve lost a trade.
And like what Mike Bellafiore constantly remind his traders, one good trade, and One Good Trade.
Summary of what you’ve learned
Click here to save this Infographic.
Trading is like any competitive sport.
It is the little habits of a champion that defines the champion.
Likewise in trading, it is the little habits added together that separate the winners from the losers.
If you have plenty of trading mistakes, start to work on them one by one, it will pay off dividends in the long run.
After all, Rome wasn’t built in a day and successful traders are not born overnight.
So, which trading mistakes do you find yourself doing?
Do you want to learn a new trading strategy that allows you to profit in bull and bear markets?
In my FREE trading course (valued at $48), I will teach you this powerful trading strategy step by step, along with charts and examples.
You can download it here for FREE.
well say in the trading habit as you mention, can share some experience of your trend trading , normally what is the portfolio you are trading, normally what is your trading time frame ?
Hi Tet soon,
I trade across all markets. I identify trends on the weekly and find entries on the 4 hour.
may l’m know that journey to become a trend trader ?
thank you !
Hi Tet soon,
These books would be good to get you started.
Great blog. I could describe it not better.
Thank you Alex.
Took me almost 8 hours just to get this up, I’m a slow writer!
But glad you liked it 🙂
Wonderful write up Rayner! As i read it, it rang a few bells in me and i could only smile to myself because i am guilty of such poor habits.
In your last paragraph of point 2, can u share what are the signals u look for that will get u to exit your trade? would love to see a separate write up based on that!
Thank you for your comments, much appreciated.
I do use moving average to trail my stops, you can check this video out for a clearer explanation.
Thanks for your excellent articles and posts. You have changed the way I view the markets.
I battle with 2 and 6. The argument against 6 is pretty convincing, and I will print this out and refer to it every time I am considering messing with my trade. Taking profits to early I find is a phycological challenge.
You’re most welcome and thank you for your comments!
I’m still constantly reminder myself everyday too, cheers.
Thanks for the article.
I am doing much better on NO.1
Guilty of more or less the rest. NO.1 is more due to impatience and wanting to be always in the market.
You’re welcome. Yes i’m guilty of them all at some point in time as well, lol.
Thank you Rayner for showing me the most relaxing style of trading I have come across.
Nice article and well presented.
You are welcome and i’m glad it suits you!
You have a very nice website. It is noticed in The Netherlands! My filosofy, traded markets and techniques of trading are very similar to yours.
I succeeded in micromanaging a trade in Brent Oil today. Instead of zooming out I zoomed in and paid for it. Well, money wel spend if the lesson sticks. But we’re al human… You should have posted it yesterday!
Good luck in your trading en keep this site alive.
Wow i’m honored to even have you form the Netherlands popping by!
Lol sorry I’ll try to get my post out as early as possible, hope to see you around more often buddy.
I like you’re blog and I want more people to read so I volanteer to translate the blogs into Arabic if you accept of course.
Best regards from Iraq
Thank you so much and i’m glad you like my website.
Feel free to translate to Arabic, only thing is to reference back to my website as the source.
Thank you and good trading!
i am trading in a market where the trading platform is “antiquated” in comparison to the more advanced countries’ system. For example, there’s no limit orders, stop loss orders, short trading etc… what is available is a VERY simple Buy and Sell orders… or GTC orders. If you want to cut your losses, you have to call your broker…not a practical way if you are outside of the country. Now, i noticed your “tutorials” are for both Short and Long…. without saying which is which but for those familiar with the system, it is clear without mentioning that you are talking about Short or Long … BUT NOT to those who are not familiar (and actually never entered into such transaction) . It is also a little bit confusing for those who are only into Long trading … which i experienced at one point but then realized you are actually talking about Shorting… etc. I don’t have problem with mixing both Short and Long but for those who are only into Long (due to limited trading platform, for example) , the confusion is real.
Most watch too much and analysis too much.
Thanks for sharing, Vip!
Here is a deadly mistake which almost blew up my account:
– Entered trade with Stop Loss Distance of 1R.
– When the market went against my favor, I refuse to admit that I am wrong and adjusted my Stop Loss Distance by another 1R distance.
– Market went further against my favor again, and I adjusted my Stop Loss again by another 1R.
– Refusing to admit my mistake, I kept repeating the exact same action until -55R later and finally decided to take the loss so I can move on.
Thanks for sharing bud!
Thanks for this,I love it..