Trader’s Biggest Mistake

When it comes to this subject, there are millions of reasons why traders fail or make mistakes but today I want to explain the number 1 reason. If you can avoid this mistake you’ll be more likely to be a profitable trader.

So we all very well could be highly profitable traders but for most traders, especially the ones starting out, they mostly start with a fantasy of becoming filthy rich. They fantasize about this so often that they want their fantasy to become a reality quickly and this is where the biggest mistake begins. Unfortunately for those that do make this big mistake could potentially keep looping the same behavior and may never reach the level they truly desire.

So it’s incredibly difficult to time the market. It’s like traders trying to pick bottoms or tops. But market reaction is unpredictable. Momentum can also be a challenge depending on where the true fundamentals are coming from. As so if we enter a trade too early, we go through a battle within ourselves of wondering how long we have to wait for this trade to turn around and hopefully we don’t get stopped out or liquidated from a margin call.

Now depending on how extreme the drawdown was from entering too early could impacted you emotionally which could interfere with your original trade plan and your next decision. Once or if the trade does turn around, you’ll constantly be tempted to close the trade because say a $100 win is better than that $1000 drawdown you just experienced. But if that drawdown didn’t just happen, you would be more likely to hold the trade in profit longer and have the energy to wait. So why is that? Well it’s because when we’re in a losing trade, it can significantly drain our energy especially if we entered with a heavy position or lot size. Or if you decided to take the trade late at night and it kept you awake all night long.

So how can we avoid this? The simplest answer is something I use to always hear in the past but never truly understood why it was important and that is to be consistent. I never really understood this because when I would find a golden trade setup, I would typically add more volume to the trade after doing my risk calculations. But the problem with this is how it would disrupt my inner being emotionally. Say the trade works out perfectly, I might get very excited or on the other-hand if the trade doesn’t work out, I might some type of way and regret my trading decision. Based on how I felt after the results of that “golden trade” will ultimately determine my next move. So is it worth adding more volume when I suspect a golden trade?

For me consistency is more than just having a strategy but means having a strict routine. For example, 6:am wake up, eat, exercise, then trade plan from 7-8am and then trade from 8:am – 4:pm. Now I’m not saying by any means that is my routine, but why being consistent and having a routine reinforces discipline. With consistency, comes stronger discipline. It’s like they go hand and hand. You’ll be more strong minded, and be able to make better trading decisions. Decisions is what trading is all about. So we should understand how we can improve our decision making process. If we have good physical health, we have good mental health. They kind of go hand in hand. And if we have good mental health from sleeping right, eating well, maintaining a positive and stress free living environment, then we can make better decisions faster and be more relaxed and confident with the trading decisions we make.

== IN SUMMARY ==

Consistency reinforces discipline and helps to maintain and improves the quality of our lives with less energy required. This allows us to make better trading decisions. Decisions in which we won’t second guess and have the energy to follow through from the entry to the exit.