A couple of days ago, one of my students asked me what seemed to be an interesting topic for today’s blog:
“Often, I was making good profit, but I give back all profits to market by doing over trading. This happens to me everytime I make series of good trades.”
A large number of students that I work with express this same feeling that they are somehow sabotaging themselves: repeating the same mistakes day after day, giving back valuable profits in a fraction of the time it took to earn them a long time. They realize that they’re not mentally ill and don’t have a history of out-of-control behavior, so they are understandably confused as to why they can’t stop shooting themselves in the foot.
When I analyse myself and many of students, I found that the primary reason of a trader doing mistake again and again simply because of GREED. They enter in to trading in belief that trading is an opportunity to earn money without any hard work, and it will be easy money. This is the main cause a trader fails and losing all his hard-earned money.
Making the same mistakes over and over will never make you a better trader but will only lose you more money. Part of your strategy should be to stop making mistakes and trade profitably. So, below are the tips I provide to my students to stop them from repeating same mistakes:
1. Make a Trading Journal:
Are you making the same mistakes over and over again but don’t know how or why? Then you are probably not keeping a trading journal. If you want to survive in this game for a long time and celebrate your wins, you are better off with a trading journal. Keeping records of all trades will eventually reveal the hidden pattern that leads you to keep repeating mistakes. The journal should contain records of your emotions, trades outcomes, and thoughts that should be analysed periodically.
2. Don’t Over Trade:
Why do you make the same mistake over and over? Are you over-trading? (Read my blog on OVER TRADING here if you haven’t.) If yes, please, know that you don’t have to participate in every trade as a result of Fear of missing out (FOMO) emotion. The emotion of FOMO motivates you to participate in many trades, including the bad ones. Professionals and experienced traders will advise you freely – do not over trade. Remember that opportunities will always be there, and FOMO should not control your mindset or interfere with your plans.
3. Stick to a Trading Plan:
Making the same mistakes is quite common with traders who don’t have or stick to a trading plan. Do not be the person making the same mistake over and over by not having a plan or sticking to the one you have. Have a good strategy for entering the market, protecting your position, and exiting the trade. Having a good trading plan is a good thing but sticking to your plans is another thing altogether. Have a detailed strategy for making entry, exit decisions without any confusion in live market.
4. Treat Trading as a Business not Gambling:
One of the biggest mistakes that many traders make is that they don’t treat their trading like it’s a business. Instead, they treat it like a gambling. If you want to succeed as a trader, you have to think of it as a serious business, because it is indeed a very serious business. In trading, it absolutely crucial that you take some time to plan your trading strategy. This means researching, defining, and backtesting your strategy.
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