This article will give you some common mistakes that traders usually makes, which inevitably lead to
losing money, and provide solutions to those mistakes.
The most frustrating part of trading is losing money when you know you didn’t have to. It’s not the
normal statistical loss that hurts, it’s the ones you could have totally prevented; entirely your fault.
These are the losses that are the result of trading mistakes. You need to learn how to prevent them,
because the key to long-term trading success is preserving your risk capital so that you can take
advantage of the high-probability trade setups when they arise.
1- Thinking too much
One of the most common mistakes which traders make, is simply thinking too much. People tend to
make trading much harder than it is. I get emails nearly every day from traders who clearly are overthinking the market and making things more complicated than they need to be.
2- Trading too much
Over-trading is sort of the opposite of over-thinking, in a way. Over-thinking usually leads to not trading
much, if it all, because you think yourself right out of perfectly good trades. Whereas, over-trading
means you probably aren’t thinking enough. You haven’t put the time to learn how to trade properly,
build a proper trading plan, or perhaps you are just so greedy that you don’t have the patience to wait
for your trading edge to appear in the market.
Whatever the cause, trading too much can be a very quick route to blowing out your trading account.
3- Risking too much
Risking more than you can mentally afford to lose at any one time, is a death-sentence in trading. Now,
the key in that last sentence was “more than you can mentally afford to lose”, what do I mean by that? I
mean, you need to really stop and look at your finances and determine how much money can you
realistically afford to lose on any given trade. This means being honest with yourself, not ignoring things
like credit card debt or student loan debt, etc. The more you risk per trade, the more emotional you will
get once that trade is live.
4- Worrying too much about money (what to risk, profits) before knowing
how to trade
Traders who start risking money without having learned how to trade, inevitably lose all that money.
Also, someone saying they are going to “make money trading to buy your course”, is like trying to fly a
Boeing 747 before having gone to flight school; if you try it, you’re probably going to crash, and if you try
trading before getting a trading education, your trading account is going to crash.
5- Chasing the market after missing a signal
Often, traders will try chasing a market after missing a trade they were eyeing. What I mean is, they
jump into the market after the trade has already taken off without them on-board. They do this because
they feel regretful for not taking that trade and mad they didn’t listen to themselves. The problem here,
is that doing this will get you in at a very bad price, requiring a wider stop loss and smaller position size,
it’s simply less-likely the trade will work out for you if you chase the market like this.
6- Not trusting yourself
Not trusting yourself or not believing in your trading abilities are big problems for many traders. Trading
is something that, as mentioned earlier, is easy to over-complicate. People tend to think trading is ‘very
hard’ or something that involves a lot of difficult math. But these beliefs simply are self-defeating ideas
that contribute to low trading confidence in one’s self.
It is a big mistake to not trust in your trading strategy and your trading plan, because these things were
learned and developed (I hope) when you were not a trade and thus at your most objective and levelheaded. So, the emotional you (when you’re in a trade) must rely on the plans and ideas you formulated
when you were not emotional (trading plan, etc.), and you have to trust in that and not waver in your
7- Paying too much attention to news and other external data
If you’ve followed me for a while now, you know I am not a fan of news-based trading. In fact, I think it’s
downright counter-productive for a trader to pay too much attention to news events and how they may
or may not impact a market. You can find whatever you want on the internet, and for a trader that can
be very dangerous. If you want to disprove your trade idea, you will find evidence supporting that, if you
want to prove it, you’ll find that evidence online too. At the end of the day, successful traders block out
external variables and focus only on their trading edge.
8- Not letting trades come to you
People tend to ‘force’ trades that aren’t there. They want to make money so bad, that they manifest
‘opportunities’ in the market where none exist. This is basically the same as over-trading, but the point
here is that the best trades will tend to stand out like ‘sore thumbs’ on the charts. You should not have
to look to hard, if you know what you’re looking for. If you find you must email people and ask other
traders “is this a good trade”, it probably is not a good trade, at least not one worth risking money on.
9- Feeling a sense of urgency to trade
Many traders become addicted to being in the market. They are addicted to the adrenaline and
dopamine rush that they get when they enter a trade. Thus, when they are not in a trade, they tend to
‘crash’ and feel terrible, the only thing that gets them feeling ‘normal’ again, is another ‘injection’ of
trading into their veins. Perhaps you are not quite THAT ^ addicted to trading, but you still feel some
urgency to be in the market. You feel like if you aren’t in the market then you won’t make money, or you
feel the more trades you make the more chances you have to make money. Well, I am here to tell you
that all of these feelings, thoughts and actions are wrong and will only lead to you failing in the long-run.
10-Not having knowledge / education before trading live
As I mentioned earlier, I get many emails from traders telling me they are planning to “make some
money trading so they can buy my course”. I have to chuckle to myself when I read these kinds of
emails. Whether you learn from me or some other source, you must, must, must get educated before
you try to trade the markets with real money. There is just too much knowledge you will miss out on by
not learning from a trader more experience than you, too much trial and error to figure it all out
yourself, and way too much to be lost.
No one wants to lose money in the market, the best way to avoid losing money unnecessarily, is by
obtaining a solid trading education before you start trading live.