Annoying Trading Mistakes and How I Deal With Them

So many new traders get into trading thinking all they have to do is develop a profitable method and that’s it. Doing that in itself can take months or even years of hard work – plus having a profitable method doesn’t automatically mean that you are immune to making silly trading mistakes.

We are human, and with being human comes emotions: fear, greed, confusion, frustration, etc. Those emotions can prevent us from trading our method exactly as we developed it, and those silly mistakes prevents us from being the best possible traders we can be.

You may not ever be able to completely eliminate making the following mistakes, but you can definitely do things to reduce their frequency.

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Problem: Not letting a trade run and banking profit prematurely.

How I Deal With It:

•  I don’t use the charts offered by my platform. After I have entered my position and my stop is entered, I log out of my platform and don’t log in again until the price hits my target profit area or the price hits my stop. That way I am not constantly watching the profit/loss section bounce around and I am not tempted to deviate from the plan.

•  Remembering the general movement of price is not always straight up or down:

• After my trade is entered, I try to keep myself distracted until it hits my target area or hits my stop. I usually blog, go for walks, go out for meals with Adam, housework, read a lot of books, read a lot of news, or annoy other traders on Google Chat

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Problem: Being influenced by other traders’ ideas.

How I Deal With It:

I love Twitter, but it is a method trust killer. If you follow a lot of people that are very vocal about their trade ideas and those ideas conflict with your own, it can lead to confusion and doubting your analysis.

Being influenced by others was probably one of the biggest trading ‘mistakes’ that I have had to deal with and I am happy i’ve got it under control, after pretty much cutting out forums and learning to block out other peoples Twitter trade ideas.

You see a lot of new traders that come up with a trading plan, but face hesitation when they get a signal because 50 other traders on Twitter or in a forum are not placing the same trade.

I mean if you’ve got a solid trading plan/method, then you should trust it and not need to seek validation from other people before placing a trade.  These days I don’t really go on forums and I never hunt out trade ideas on blogs/sites/Twitter.

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Problem: Entering non-setup trades.

How I Deal With It:

Why do we enter prematurely? Because we want to be ‘in it to win it’. We also don’t like the thought of seeing the price go the way we thought it would and we don’t want to miss out on potential profits, so we proceed to open a position based on what our gut is saying just to be in the market.

The worst thing is when non-setup trades are profitable, because that can create bad trading habits. If a non-setup trade works once, then we are tempted to do it again and again.

I find documenting trades properly and honestly can help identify if entering non-setup trades are an issue. When documenting your trades, it is important to always note the reason for entering a trade. If you see a bunch of non-setup entries when you review your trades, then you know that’s something you need to work on.

Try donating your non-setup trading profits to charity or ban yourself from trading for a few days after you place a non-setup trade.

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Problem: Having your confidence rocked after a losing trade.

How I Deal With It:

Losing trades happen and are a normal part of trading. If you can’t handle losing trades at all, then you shouldn’t be trading. A losing trade shouldn’t be a mega stressful event.

Most of the time you should just be able to shrug losing trades off and move on, but there might be the odd occasion where a losing trade might rock your confidence slightly (mainly when a winning streak is broken or if you are just having a bad day).

I usually just take a bath and get Adam to give me the, ‘You know this is a normal part of trading’ lecture. He doesn’t take whining shit off me lol.

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Problem: Entry/Exit hesitation.

How I Deal With It:

Method confidence can be achieved through testing (back and forward testing) and trading your method with real money over and over again.

I started small and then slowly built up the lots as I got more and more confident with my method. There is no rule saying you have to go all in straight away.

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Problem: Resisting the temptation to leverage to the moon.

How I Deal With It:

Everyone has a different idea of what is risky/greedy in relation to his or her own trading style and account size.

To keep me from wanting to do anything too drastic, I always think of my worst trading experience and the feeling that came along with it.

I traded a particular stock a bunch of times successfully, got greedy and opened a position a lot larger than I normally would expecting the next news release to be a positive one. And of course a really bad news release came out and I got slaughtered.

There was a lot of swearing and I was rolling around the hallway with what felt like a million knives stabbing into my stomach; all because I was greedy and didn’t plan for the unexpected.

Ohhhhhh that trade hurt so bad – but I learned a lot from it.

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Problem: Not being able to close a losing trade/ignoring or moving your stop.

How I Deal With It:

A stop is a point where you close your trade because, a) From this point, the probability of this trade being successful is lowered, and b) This is the maximum amount I feel comfortable losing for this particular trade.

The size of my formations determine how big my stop needs to be/how many lots I will be trading. Learning where to place your stop and being able to trust it comes with hard work and practice.

NOTE:  Using systematic, mechanical rather than overly discretionary, systems allows a trader to monitor the actual trade actions and outcomes against system determined trades, entries and exits. That enables a trader to compare their actual system performance with a tested system performance to eliminate any variance over time.  An over-acceptance of mistakes by a trader just keeps them from profitability. The mistakes above should be eliminated as a matter of urgency for a trader to make progress with their trading.