Why is it that some people have such amazing success in the financial markets while others crash and burn. Is it because they don’t have the best charting software (Not even close). Is it because their broker secretly hates them?
More often than not, it’s because they refuse to drop bad habits that lead to loss after loss. To make things clearer, we’re exposing the top five reasons you could be failing as a trader.
1. Not Having a Plan
Plan your trade and trade your plan. Does this phrase ring a bell? If it doesn’t, we urge you to go back to the beginning of your education because this should be one of your foundational rules. Just like you can’t build a skyscraper without blueprints, you can’t become a powerhouse trader without a plan.
It is important to have a plan for every trading strategy and every single trade you make. Imagine if you traded AAPL (Apple Inc.) with the same plan you traded the CMG (Chipotle Mexican Grill). Would your trading account be happy? We’re going to go out on a limb and say… probably not. Diversify your plans so you could take optimal advantage of the market regardless of your trade.
2. Being Fearful of Loss
If you’re terrified to lose, how do you ever expect to win? Trading is such a mental game. If you go in thinking you’re going to lose, chances are you probably will. I’ve meet too many traders who stare at the screen, biting their fingernails; waiting for their PNL statements to turn red.
In the end, they cut their winnings short because they’re scared to see their profits disappear; resulting in a loss when they could’ve held on and eventually profited. Trust me when I say, a positive mindset will go a long way in helping you reach your trading goals.
3. Running Before Walking
It’s natural for traders to get excited when they first enter the market. Often times, they know someone who has done very well in the forex or options market, so they dive head first into a trade without the proper preparation. Trading isn’t rocket science, but we never said it was easy. This is why I encourage traders to open a demo account and practice a trading strategy before you put money behind it.
4. Blaming Others
We’ve all had a bad trade and we understand the negative emotions and the amount of stress it can put on a trader. It can be unbearable. In these times of distress, it’s easy to play the blame game. “If only the market would of u-turned as I predicted.” “The indicator I’m using can’t keep up with the market movements.” We’ve heard every excuse in the book and to be honest we may have uttered one or two ourselves. (Hey, we’re not perfect.) But when it comes down to it, YOU are the person in control of your trades, not your indicator and certainly not the market. Accept responsibilities from your mistakes and use them to become a stronger trader. It’s all about learning how to turn a negative into a positive.
5. Focusing on Past Trades
There’s nothing wrong with relishing the past, but once you start living in it, you could be heading down a dangerous road. Successful people do not live in the past, they are always looking to the future to see how they can improve. Don’t you think it’s fair to say you should be doing the same for your trading career? If you focus on your past trades (winners or losers) the odds of you being able to adapt to an ever-changing market are slim to none.