Why Traders Fail (WTF) Series... My personal thoughts & experience!
You can never get any 'real' than this... 😈
1) We do not have discipline, we create a plan to trade, that's good. But: 1.1) Keeping to the plan after entering the trade is quite a challenge, the longer you are in the trade, the more prone you are changing your initial plan. 1.2) Keeping to the same plan over and over again is also difficult. If you have executed Plan A over and over again, closing trade after trade in profit or in loss, you will get tired of it over the long run. You will suddenly trade Plan X and Y and that is when you lose all your money.
2) Over-leveraging: 2.1) We might over-leverage because of mindset. We have a mindset of getting rich quick, we really want to turn $100 to $1000 overnight, we really believe we can do it so when trade turns against us, we quickly lose our money. 2.2) We might over-leverage because of revenge, we lost trades over and over again, so we need to re-gain all that losses, so we risk more to gain more, and again, when our trade goes against us, we lose our money faster than expected.
3) Instant gratification: If we are always right in trading, we might not have this problem, but the thing about trading, you can never be 100% correct, so you are bound to have losing trades. When you have too much of losses, you want to just be right at least once or a bit. So when our trades gets a little bit into profit, we will close it. As such, the profit will be a little bit. We do not do the same with losing trades, we try to wait it out, hoping that price will come back, or giving the trade 'some room' before it will move in your direction. Over time, the losses will overcome the tiny profits and we will again lose our money.
4) Impatient: It is good to trade according to what we see but we need to have a confirmation. Sometimes we see a seemingly obvious and outrageously big down candle and we jump in a SELL trade, we did not wait for any sort of confirmation like candle close. As such when we enter we are caught at the extreme low point and before the candle closes, it reverse and creates a obvious and outrageously big UP candle. We know we are doomed. We never expected nor could imagine it can ever be a UP candle, our eyes and impatience deceived us.
5) Always good to be out of the market when things get a little crazy. Minimizing your time in the market is always good.
Just like opening your mouth always exposes your intellect for everyone to see and to be judged. Keeping your mouth shut gets people thinking how much this person actually knows...
It is well known that markets can affect us emotionally. Having positions in the market already exposes us to risk. So it is beneficial to remain out of the market and only be in it as long as necessary.
The take away here is preferring to be out than to be in. Till next time. Trade safe.
Treat your winning trades like your losing trades.
When you have a losing trades, you have hope that price will turn around back into your favour. You will have that drawdown so big that it will be too late.
When you have a winning trade, you are so tempted to close it so that you can realized the profit. Eventhough it has not reach the maximum profit potential. You are also afraid that you will lose the profit if the price goes against you before you are able to close your trade.
These are some of the main causes people lose in trading, close winning trades prematurely and hold losing trades for longer that you should.
Stop Loss places on every trade as an insurance in cases World War 3 or Ecomic Collapse happens and your not at your desk. Taking stop loss should always be on your mind and it is fixed. If certain situation happens, take stop loss automatically. An encouragement could be that you can entee the trade at a better price at a later time.
Take Profit target should be placed on every trade to visualize your end goal to help remind you that there is so much more that you can make instead of listening to that instant gratification voice in your head.
Trade with an edge as much as possible, this will not only help you but it can save you...
Edge Number 1: Time. Time is your friend and time will tell all market movements so don't rush it. Edge Number 2: Lot sizing. Lot sizing helps on the emotional control of a trader. No sweat so no worries.
Market movements are right in front of your eyes, MT4 won't hide anything from you. Charts are there for everyone to see, there's no deleting them. Additionally historical charts are always so obvious. Why is this so? Because they get finished painting when everything closes/end. In other words, wait till the end to make a decision. Do not trade what has not been confirmed, in another other words... WAIT. It is confirmed when candles are finished painting and it closes.
Do not trade the news, reason above and also everything is still moving and nothing is being confirmed. However, you are in the thick of the action, your heart is racing, everything feels good when you are winning and you feel like 'trading', well in most cases, you are losing. Unless there are so many factors being met when news is release, try to stay out of trading it.
There are many scenarios when you can the direction right but got stopped out. There can be many reasons you get stopped out, maybe because; your stops are too close, or additionally, your trade size is too big that you cannot 'afford' a bigger stop loss distance. Stop loss are placed in world-crisis scenario, in other words, it's a backup. If you can't take your own loss, your not a man yet. Think about this. Grow up and then get back in the 'game'. (This is not a game). Personally, I've place a very small lot trade and let it run, It went against me for 6 months and came back into profit and I closed it (I made a video of this in YouTube). This shows that eventually, 1) everyone is right at some point in time, 2) each trade can be profitable, when the time is right, 3) this could be used as an edge. When time in on your side, and limitless drawdown is on your side, and you can sleep at night because lot size is small, all this is your edge against the market.
High probability trades are better than blind/gamble/lucky trades. Trades with a take profit is better than trades with no target. Trades with a stop loss is better than trades with limitless loss. Entering a trade late is better than having a high probability losing trade. Losing trades is better than over-leveraged trades. Not trading and waiting is better than having losing trades. Not trading is better than news trading.
High probability trades are better than blind/gamble/lucky trades. Trades with a take profit is better than trades with no target. Trades with a stop loss is better than trades with limitless loss. Entering a trade late is better than having a high probability losing trade. Losing trades is better than over-leveraged trades. Taking a small loss and looking out for a better entry is better than holding on a losing trade hoping it will turn around. Not trading and waiting is better than having losing trades. Not trading is better than news trading.