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7 Ways to Become an Unsuccessful Trader

  
  Education
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If you’d prefer to become an unsuccessful trader, you can start by making the following common trading mistakes.

-The first big mistake is the flawed logic of extrapolation. Many traders and investors assume that a trend will remain in force until an “event” comes along to change it. But market trends are not like billiard balls on a pool table. This false assumption will put you on the wrong side of the market more times than not, especially at major turning points.

-The second big mistake is to suppose that news events drive market trends. In fact, the opposite is true: economic, political and social events lag market trends.

-One common mistake is to buy puts or calls that are way “out of the money,” with no other transactions to compliment them. Unless your timing is absolutely perfect — and who has perfect timing? — your chance of success is low. It’s like buying a lottery ticket.

-Another common mistake is to buy options with too little time left to expiration. With less than one month to expiration, the time decay begins to accelerate and the chances of success diminish.

-In the middle of a corrective pattern, it’s common to run out of patience while waiting for confirmation of a trend change. You have to give corrective patterns time to unfold before you jump in. This requires discipline, and a solid understanding of the many ways corrective patterns can unfold.

-Too many traders think Elliott wave is a trading system that tells you exactly where to enter and exit a particular market. That’s the biggest misconception. The reality is that it’s an analytical and forecasting tool, which helps you develop and use your own trading system, based on your own personal risk tolerance.

-Traders tend to over-rely on momentum indicators such as RSI, Stochastics and MACD to precisely spot turning points. But to paraphrase Mark Twain, markets can stay overbought or oversold a lot longer than either you or I can remain solvent.

5 Keys to Dealing with Trading Fear

  
  Education
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How comfortable are you dealing with uncertainty?

As volatility and uncertainty increases, so does fear. When our emotions run high, then our decision making process suffers.

It seems like the harder we try, the worse things get.

We start reacting to things instead of being proactive. Then we feel overwhelmed.

Does this sound familiar?

One of the hardest things to deal with is uncertainly.

We have strategies for managing our risk in most aspects of our trading. However, we seldom talk about or have strategies for the most crucial element, our Personal Risk.

 

Have you noticed the panic that is going on in the markets? Do you know people who have been a contributor to it? Do you know them intimately?

How do you manage your Personal Risk? 

1. Trade With a Clear Mind

Do not make emotional decisions. Realize that emotions are emotions. What differentiates the successful traders from others is how we recalibrate our reactions to our emotions.

 

I was watching an interview with a surfer. The interviewer asked him what he does when a big surf comes and he goes underwater. The surfer said it was simple. “If I panic, I only have 3-5 seconds of air to breathe. If I stay calm, I have 45-60 seconds of air.“

What does surfing have to do with trading? If you panic and operate from a place of fear, you could lose all of your capital. However, if you take a moment and think about your strategies, you can have much better results.

2. Look at Your Portfolio Objectively

Think about your portfolio as if you are looking at the portfolio of your best friend. How would you advise him/her?

3. Limit Your Input

There are a lot of conflicting points of view. If we want to listen to all of them, it becomes very confusing, and the confused mind does not make a decision.

Instead of listening to everybody, pick the top 3 people that you respect and listen to them. This way, you can remain focused and have much better trading results.

4. Be In Tune With the Markets

Trade the markets as they are and not as you want them to be.

If we are not in tune with the markets and don’t listen to them, we are going to be in a losing game.

After all, hope is a lousy hedge.

5. Be In a Supportive Environment

It is important to listen to the people that we respect and are successful.

 

There are traders whose spouse and/or friends have little or no risk tolerance. As a result, these traders allow the fear of their spouse and/or friends to become the boundaries of their success.

Who are you choosing to surround yourself with?

Remember, not the most talented or skilled person wins the game. The game is won by the ones who can manage their Personal Risk and have a Mental Edge.

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