Common Mistakes by Traders

Common mistakes

  • Distinction between coincidence and expected outcome
  • Volatile mind that doesnt remember consistency
  • “All it matters is money”
  • Forget the losing trade.

Distinction between coincidence and expected outcome

When a profitable trade is completed, we often do not ask ourselves – “whether the completed trade was a result of our expected outcome or it was just a coincidence. There are only two directions price can move UP or DOWN. Even if you toss a coin and chose a trade direction, you may still be right! It is another story that you may not be consistently right by trading based on the tossing coin outcome. So you should ask: “Was there anything in the trade that left a sure indication that it couldnt have been a coincidence?”

The grass is always greener on the other side. Even if we make a 100 bucks on a bright day, there is always a neighbor who made 150.  He will be very happy to tell us that his strategy is giving him lot of profits. But it is another story that if he faces a huge loss, he will never inform us! So, we always get to know others profits and not their losses and this leads us to question our strategy & not to improve upon it!

 

Volatile mind that doesnt remember consistency

A volatile mind is only excited about big profits others are making. Such a mind doesnt care to track the consistency of a fellow trader. A wise mind always values consistency above temporary profit.

 

“All it matters is money”

Most traders think, after all, all that matters is the amount we are earning. The problem with this approach is that, it never takes into account the strategy being used to gain the money and whether the strategy is solid enough to survive an economic recession.

Therefore, the ideal thought process should be “All that matters is the strategy”.

Forget the losing trade

Most traders try to forget their losing trades since there is nothing to be learned from a losing trade – it always gives us pain. But a wise trader, never forgets his losing trades and searches for the reason for the loss and once he has found the reason, he includes this as a weapon in his armory for his next trades

 

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