Awareness is the first step towards improvement and that is why we collected the 44 most common mistakes a trader can make. Making mistakes is not bad at all and it is part of the process, but when mistakes are made repeatedly, bad and unprofitable habits are formed. The more bad behavior you can eliminate from your trading, the better.
General Trading Mistakes
1. Changing your trading strategy after 5 losing trades in a row
Losing is unavoidable and even the best traders will regularly realize losses. Changing your approach after a few losing trades sets you back on the learning curve. Stick to your approach, every losing streak will end.
2. Not expecting the unexpected
A sudden market collapse, an unexpected news release or the loss of your internet connection can happen at any minute. Be prepared by having a fixed stop loss in place. If a single trade could wipe out your trading account, you have not done your homework as a trader.
3. Not keeping track of relevant news releases – denying the importance of news
Even if you are a purely technical trader, you do not have to trade the news, but you have to be aware of them at any point in time.
4. Not being prepared
Do you just fire up your computer, start your trading software and dive into the charts? Just like a plane pilot doesn’t just ask his co-pilot after the take-off where they are heading, a trader needs to have a detailed trading plan for the upcoming trading session.
5. Not doing a post-trading analysis
What you do after your trading session is over determines your future success as a trader. The professional traders analyze their trades, crunch data and plan for the next day.
6. Not using a trading journal
One of the surest signs that you do not have a future as a trader is when you do not have a trading journal and claim that you do not need one.
7. Not fully learning one method
The consistent losing retail trader jumps from one method to the next, hoping to stumble over the Holy Grail. You have to accept that there is no superior trading method and that it comes down to your abilities to make a trading strategy work.
8. Failing to adapt to changing markets
Once you find a way to consistently make money trading, the work does not end. Financial markets are ever changing and evolving organisms. If you fail to adapt to changing market conditions, you will be out of business shortly after.
9. Letting hindsight influence your trading
Amateur traders watch a trade after they have exited it and beat themselves up if they have entered too early. Other times they try to find reasons why a trade was a loser to change their whole trading approach on the spot. The professional trader collects data and makes educated trading decisions based on a large enough sample size.
10. Not understanding the difference between long term and short term perspective
Over the short term, anything can happen. You cannot control the outcome of your trades and you can certainly not predict the outcome of your next two, three or even ten trades. But over the long term, that does not even matter. If you have a trading strategy that has a positive expectancy and follow it religiously, the only possible outcome is making money.
To be Continued