It’s a known stats that 90% of traders end up blowing up their account and giving up within 3 months of there trading .But you don’t have to be included in this statistic when you can simply learn from their mistakes before you make them. If you have not yet already nursed the battle scars from the markets as an amateur trader, it’s very highly likely that you will any day soon. Face it; it’s only a matter of time…unless you are prepared to learn about what key traits separate successful traders from the unsuccessful ones.
In this 4 part Series I would like to share with you the four biggest mistakes traders make which leads to blowing off their trading account and shattering their self-confidence when trading stocks.forex and crypto markets.
The Four Biggest Mistakes
1. Lack Of A Trading Plan
2. Using To Much Leverage
3. Failure to Control Risk
4. Lack Of Self-Discipline
Lack Of A Trading Plan
We often talk about the importance of following a trading plan. However, following a trading plan without bending any rules is easier said than done. Here are a few reasons why most traders have trouble sticking to their trading plan.
A trading plan is a set of rules, to define your trading activity. The time you sit in front of screen till the close of trade everything should be documented in trading plan. It has your entry,exit, profit booking SL levels and also your psychological strength and weakness. It can be an extremely useful tool to help you focus on planning and executing your trading strategy.
There is no absolute blueprint for the perfect trading plan – every trader is unique, and different styles suit different people – Let me share the universal things which should be included in trading plan.
Without a trading plan you’re just gambling in the markets.
If you take great pride in your trading and truly want to succeed over the long run, then I am sure you find yourself as I do, constantly consumed by monitoring your trades and strategies to be sure the process is executed correctly. If this is you, then congratulations, you are rare and likely making some big money.
Why Do Trades DO Not Make Trading Plan
The main reason trader trade without a plan is because of the allure that making money in the market can be quick and highly profitable. Many people just do not want to “waste” time planning to trade when they can just pull the trigger to buy and sell within minutes of opening a trading account.
This mind set is understandable. We are all guilty of tossing a product manual to the side and just try to build or use a new product without learning how it works, only to realize hours or days later we are reading the manual because we made some mistakes…
Why don’t traders follow their trading plan?
Fear and panic
The first reason is probably the most common one; traders fail to follow their trading plan because they panic. There will always be times when your trades flow perfectly and others when they do not behave as planned.
Some currency traders become nervous and taken off guard when their trades don’t go as planned. They can lose their grasp of reality and speculate impulsively with no regards to their trading plan.
A lack of confidence in the plan
A lack of confidence in the trading plan leads some traders do not follow their plan when they think that a trade will not work out. The result is that you end up taking trades that are just based on simple intuition and not on statistically proven probabilities of success.
The trader’s personality in relation to his/her trading plan
Lastly, there may be times when you feel compelled to make a trade because your trading plan requires it. Or vice versa, you don’t make all of the trades that are required because of your life and your personal obligations.
This inconsistency can affect your bottom line. At the end of the day, you need to determine whether your trading plan is right for you. Ask yourself, “Does my trading plan fit my style of trading?” You need to know your own trading personality and your trading style in order to develop a plan that suits your lifestyle and your personality.
How to Avoid Mistake #1 – There are only two ways around making this mistake
Avoidance Method 1 – The first is to devote as much time and energy needed to develop a detailed stock, ETF or futures trading strategy that addresses all of the key elements of a successful trading plan and system and still knowing that this will BOT guarantee your success.
What ever strategy you follow You need to clearly define
- Profit Booking Level
- Stop Loss – Risk Management
- Trade Size – Money Management
- Maximum Loss due to conditions which you cannot manage like internet not working etc.
- Series of Loss making trades which can happen
While entering the trade you should be confident and do not have second thought. End Result Loss or Profit should not bother you.
I hope this short report helps you see the light at the end of the very long tunnel of creating, building and following a trading plan. Without this first step/blueprint you are doomed from day one.
As with any business or professional to be a success a great deal of hard work is typically involved. First of all it is not easy to build a successful trading plan. And then if you can do that, then you need to follow the plan, which is actually even harder. If you want to be a successful trader then you better be prepared to pay the price in terms of time and money.