The tendency to keep repeating same trading mistakes
I want to tell you the truth that it took me 3 years to get on track. As hard as it is to believe, even with heavy reading of the forums, articles and books, with heavy training, I still have the tendency to keep repeating not only the same trading mistakes but also kept the same attitude that prevented me from being a consistent winner.
There are a couple of common mistakes that jump in to my fingers.
The most important ones from my own trading beginnings:
1. The number one important factor is your mindset.After reading this blog, try to read (again) the book Trading in the Zone by Mark Douglas. It explains mostly psychological issues which are the number one reason traders fail!
2. Put aside daily financial goals for a while. If you have a goal to make $nn, or $nnn per day, the hidden mind status is that you can control the markets and the opportunities. Markets are not that cooperative in the beginnings.
3. Find the reason for your lack of consistency. Most of the time its as simple as you breaking your rules on your trading setups and style. Doesn’t matter how complex are your rules, you cant achieve the results unless your rules, created for yourself, are followed.
4. Capital. You must be trading with risk capital. It is almost impossible to win if it is bread money, rent money, tuition or necessary funds. No matter what the setup, a trader betting with desperate funds is going to be too frightened to let the trade work. When it is profitable he will be so desperate for profits that a 4 point profit will make him satisfied. When the trade goes against him he will jump out so the stop doesn’t get him. A recipe for disaster.
All the time you have to consider the worst case scenario. Lets say we trade 3 times per day. And for 5 days straight take all 3 losses. It’s never happened yet but consider it. Lets say our stops are 12 points each. That is a $360.00 loss per day x 5 = $1800.00 plus $150.00 commission. You must ask yourself could you suffer through that kind of drawdown and not jump out the window. If you said yes then you at least are not playing with scared money.
And if you said “yes, I am prepared to take every signal and assume it will lose because no one knows what the market will do next”. If you give yourself a $3000.00 maximum drawdown then you can at least start to trade with discipline.
There is no advantage to stopping yourself after 2 losses or quitting for the day. Only quit for the day if you are sick, or emotionally too rattled to trade.
Do not trade that day if you feel irritated.
Your goal should be to have followed every trade. If a trade is called by your system or method, you should have been in it. Your entry should always have been 1 or 2 points near where the signal occured. If the system stopped out, then you should be too. You should never be stopped out when the system stop was not hit. Doing that says you believe you know where the market is going to go. You don’t. Neither do I. Neither does harry potter.
Think of it this way. If you were a pro baseball player your first job at spring training would be to work out to get back into shape, not hit home runs. Same with trading.
