Stop making these trading mistakes!

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In order for you to improve yourself in everything you need to learn from your mistakes and eliminate them from your life. If you’re a serial procrastinator, the only way to improve this is to get things done instead of putting it off until tomorrow. Easier said than done, but small incremental improvements every day will make a huge difference a year from now.

Trading journal

Not using a trading journal is like trying to track your fitness without a heart rate monitor or something to monitor your steps. You might feel a little better, but you’ll never really know how much you’ve improved over time.

Trading logs provide a level of discipline that all successful traders use when making decisions and then reviewing trades during and after the trade is closed. It can be a simple notebook or an Excel spreadsheet that details the transaction, the expected outcome, the outcome and, very importantly, the reason for the transaction. Some traders also like to document the condition of their metal when they opened the trade. It gives you the opportunity to see where you are making mistakes and what you are doing well.

Maybe you are approaching deals too close to big business announcements, or you had an impulse trade that caused you to lose and removing those bad decisions will make a huge difference to your bottom line.

Stop the losses

It is vitally important to use stop losses when trading. Too many people enter the trades with an outcome in mind but ignore the downside. Unless you’re very lucky, most trades go against you for a while before they move as expected. However, when they continue against you, it is very difficult to cut the position and move on. By using and sticking to stop losses, you can take some of the emotion out of when you take the pain.

There are many different ways to calculate your stop loss, but the easiest way is to work on a percentage of your trading account. 2 – 5% is a rational starting point based on your gain / loss ratio which can be determined by referencing your journal.

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Emotion plays such a central role in trading that if you can eliminate this facet, you will be on your way to success.

Preservation of capital is the most important aspect of building wealth – very much in line with Warren Buffett’s two famous investment rules: “Rule no. 1: Don’t waste money. Rule # 2: Never forget rule #. 1. “

Reduce current profits and losses

It’s a staggering fact that over 65% of customer transactions are profitable. Once in the dark, the temptation to close a winner is enormous. Conversely, it is very difficult to close a losing trade because the hope that it will turn around is a powerful emotion. No one likes to lose money, but the need to protect capital is very important and if you timed a trade incorrectly, cut it early and reevaluate it. Most traders lose capital with pride because you believe you are right. You stick to losing positions that can eventually wipe you out.

Reading the book Market Wizards, by Jack Schwager, it is very obvious that the best traders in the world do not win on every trade. When they are wrong they suffer a small loss but when they are right they straddle their winners which make up for any small losses they have suffered and much more!

Common sense – not so common

The trading industry has created the illusion that with a little bit of money and a strategy you can easily make a lot of money. While you can be lucky for a while, that luck can run out and you will end up losing a bundle. Try to approach trading as you would a business. Testing different ideas, calculating and analyzing data, tweaking, continuously improving, preparing, journaling and being disciplined are all things that the regular trader doesn’t want to hear, which is why he loses money. silver.

Your responsibility as a trader is to find a method that has positive expectation. Apply it religiously and constantly monitor every little aspect of your performance. Don’t try to force winning trades, the markets can stay solvent much longer than you can.

The key to becoming more profitable is to develop your plan and stick to it. Eliminate stupid mistakes or at least learn from them and try not to repeat. Continuous improvement will bring huge benefits and, as Henry Ford said, “if you always do what you always did, you will always get what you always got. “

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