6 COMMON MISTAKES – BIG PROBLEMS FOR TRADERS (and MENTORS)
Failure to follow instructions properly
It is good to know that the majority of our clients make healthy returns from our services (the winner of our monthly whale programme competition made $16,600 in March)
However, there is still a small % who do not manage to match these returns or even come out profitable for the month. Either they don’t follow the instructions, enter late, close late or they just do their own trades in addition to our top trades which are often impulsive/emotional trades with little sound foundation. This lack of focus and the random trading leads to inevitable losses in the end.
Taking only the easy trades
Invariably the easy trades will appeal to most traders and it is often these intuitive trades which fail and are traded by everyone!. This explains the notion of always catching the losers and missing the winners. The reason behind this is subconscious. You will feel more comfortable taking a trade which intuitively feels the right thing to do and ironically its often these trades that fail. Whereas the uncomfortable trades are often the best trades which result in the big pay outs. These are often missed or traders come out way too early for this very reason i.e ”they are uncomfortable to take” and fear sets in. Some of our best strategies which have a 90% hit rate are counter intuitive trades which go against normal thought process. If you learn how to trade the markets properly then you will start to naturally think with counter intuition.
Trading too often
Spending too much time at the screen will ultimately lure you into trading more and more – trading screens are very much like fruit machines in this respect! Over trading will not make you money but will line the pockets of your brokers through spreads. Invariably over trading is usually attached to clients trading too small a stake and they therefore need a higher number of trades to make a decent return. If you are trading too low a stake you either have no trading plan or don’t understand how to make money in the markets properly. Our most profitable clients trade with a higher stake size and trade less frequently. They just trade the strategies taught on the WHALE PROGRAMME and PRO TRADER.
We all have to take losses in trading and we are wrong around 25% of the time but losses do not effect our overall profitability as we cut them quickly. Its easy to get attached to a trade (“marry your trade” syndrome) and hope that it will come back to your entry but it just takes one trade to keep going against you to ultimately clean out your entire trading account and leave you psychologically scarred! Why put yourself in such an uncomfortable position. Follow your trade plan with discipline.
Market conditions are constantly changing and therefore a decent strategy will phase in and phase out and by this we mean there will be times when a strategy lines up multiple trades over the course of a month and there will also be lean months when there are not many opportunities. The lean months are often times when a strategy is going through a draw down period but an effective trade plan will filter out most of the bad trades and result in a low draw down period.
Unwilling to invest in their business
Trading is one of the cheapest businesses you will ever find for the potential return you can get out of it and requires a small amount of investment for the potential rewards. If you take an average business returning £100k a year then the upfront capital expenditure to generate that £100k will be in excess of £300,000- £1,000,000 just to buy/create it and then you have all the working capital to run it.
It still amazes us how some traders enter the trading world and expect to generate a decent income without investing a small amount of time and money to actually learn how to trade.