1)Refusing to define a loss
2)Not Liquidating a losing trade ,even after you had acknowledged the trades’s potential is greatly diminished.
3)Getting locked into a specific opinion or belief about market direction.From a psychological perspective this is equivalent to trying to control the market with your expectation of what it will do :”I’m right ,the market is wrong.”
4)Focussing on price and the monetary value of a trade,instead of the potential for the market to move based on its behaviour and structure.
5)Revenge-trading as if you were trying get back at the market for what it took away from you.
6) No reversing your position even when you clearly sense a change in market direction.
7)Not following the ruled of the trading system.
8)Planning for a move or feeling one building ,but then finding yourself immobilized to hit the bid or offer ,and there after denying yourself the opportunity to profit.
9)Not acting on your instincts or intuition.
10)Establishing a consistent pattern of trading success over a period of time ,and then giving your winnings back to the market in one or two trades and starting the cycle over again.
The focus on avoiding losing is an easy condition to slip into. I found it especially so if you’ve had some tough periods in your life. Perhaps you lost a business, blew up a trading account or went for that promotion and failed to get it.
It is particularly easy when you are taking down data to analyse your performance as most effective performers do. That data is right in front of you. Clear as day. You can see exactly how many losing trades you have had, how many losing days, weeks etc.
You have an understanding that it’s all about probabilities and that if you follow the old saying “limit your losses and let your winners run” you can be a successful trader with a seemingly bad win rate (30-40%). As long as your winners outshine your string of small losers you will be OK. (more…)
The job of a trader is to make good risk / reward decisions over and over.
To get better and better at doing this over time.
The cash will follow.
If you are only about the money your longevity, in my humble opinion is limited.
One danger about only focussing on the $$ is that you push it too hard in the quest. The risk is burning out or blowing up your account. We’ve all seen or heard of traders who break down under the pressure that they’ve put themselves under to hit their monetary target or who have swung for the fences so hard that they have destroyed their account. Occasionally these traders fly through the finish line in magnificent style.
On the other hand:
If you love the process that you take to define the good risk / reward trades and the execution of them then you are likely to be a success. (more…)