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In my opinion, trading is a double-edged sword.

On one side, it’s full of opportunities. It can be an exciting world (if you know what you’re doing).

On the flip side, anyone who doesn’t tread carefully easily gets their expectations shattered and their account burned.

Take it from me, I’ve been doing this for a long, long while. I’ve seen it happen several times and just like anything else in life, I think a trader’s chances of success hugely depend on their foundation.

Most new traders only hear the rosy side of the market and jump in without proper education and discipline, and the result?

They end up making common mistakes that cost them. 

These are mistakes that can easily be avoided, and from my experience, it comes down to.

1. NOT HAVING A SOLID PLAN

Like most things in life – whether it’s winning a game, a war, or building a successful business – the first and crucial step to increasing your chances of success is having a good plan.

And this applies to trading too.

Ask 10 new traders what their goal is, and I bet 9 out of 10 would say “I want to make money”.

Sure, that’s what we’re all here for, but that’s not going to happen if you don’t know HOW to make it happen. 

So having a vague goal like “making money” is not enough. Every trader should – no, *scratch that* – every trader MUST have a clear idea of what they want.

And a good way is by setting (and writing out) SMART goals. 

SMART is an acronym that stands for;

S – Specific

M – Measurable

A – Achievable

R – Realistic

T – Timely

If you’ve never built a trading plan before, here are some key points that every good trading plan has: 

• What type of account (%) growth are you expecting annually? 

• What is your max position (% of account) size? 

• What markets will you trade? 

• What strategies and indicators will you utilize in your trading? 

• When preparing to enter a long or short position, what signals/indicators will you utilize to time your entry? 

• How will you determine targets? 

The goal is to take decision-making out of the equation as much as possible and have a clear roadmap to follow.

Remember, those who fail to plan, plan to fail. 

 

2. HAVING UNREALISTIC EXPECTATIONS 

I hate to break it to you or any new trader reading this (that might have thought otherwise)…

Yes, you still have to keep your job.

Forget the idea that your next trade (or the one after or the 10th after) will make you enough money to quit your job.

Trading is not a get rich quick scheme, and it’s definitely not going to happen overnight.

…especially if you’re starting with a small account (say $3,000 to $5,000).

That’s why it’s important to have realistic expectations, as it really sets the tone for your emotional/mental state.

This way, you won’t put yourself under pressure and make decisions based on your emotions in an attempt to reach those (impossible) goals.

 

3. GETTING DISTRACTED AND TRYING TO DO TOO MANY THINGS

I’m a firm believer in being realistic. So here’s another dose of hard truth;

As a beginner (and even with some experience), the reality is that…

  • Identifying your setup won’t always be easy
  • You won’t catch every move

So it’s common to be tempted to try something new or different when things aren’t going well or when you feel like you’re missing out.

You have to develop the discipline to stay focused. 

Because what’s the point of having a good plan if you’re not going to stick to it?

The fact is that the markets will be open tomorrow… and the next day and the next after that. So why spend time trading bad setups? 

 

4. PUTTING ALL YOUR EGGS IN ONE BASKET

I’ll keep this one as short as possible.

Putting all your eggs in one basket is almost never a smart move – especially in a volatile game like trading. 

The tides can turn any minute, and when you have your entire account (or most of it) on the line, it’s hard to stay rational. 

Which leads you to making emotional decisions…and that just sets you up for failure.

Remember the first point of having a good trading plan? Part of your plan needs to be your max position size per trade.

 

5. LETTING YOUR EMOTIONS GET IN THE WAY

The biggest opposition you’ll face as a trader isn’t the wall street fat cats or the high-frequency traders…   

I keep telling anyone that cares to listen is that “a trader’s worst enemy is their emotions”

You’re not doing this to be “correct”, the goal is financial freedom, and to make that happen, you’ll have to drop your ego.

Most beginners and even experienced traders make the mistake of sticking to positions that aren’t working, hoping it’ll somehow turn out good.

I think it comes from fear of admitting they made a wrong call. 

You need to learn to “CUT LOSERS”

The markets are masters of exploiting weaknesses, and if you don’t have your emotions out of the way, your account will suffer.

So the next time you have a position going against you, it’s okay to be wrong and try again, or just move on.

One thing I have found very helpful when it comes to my emotions in trading is books on trading psychology and I am not going to leave you to get lost in the depths of Amazon trying to track down a random book.

HERE are the 2 books I personally recommend and enjoyed learning from myself.

Author:
Jason Bond

1 Comments

  1. Jason,nearly four years ago you and KYLE DENNIS, attracted me to Raging Bull. I pray KYLE is well and his family healthy, as well as you and yours.

    As always your reminders and constant targeting of the “vital” intricacies of trading and winning are SPOT ON!!!!

    ALWAYS, your main theme that hits home for me is “STAY FOCUSED”. TRADE WHAT YOU KNOW!!! TRADE SMALL WIN BIG!!!

    THANK YOU FOR A GREAT FOUNDATION AND CONTINUED MAINTENANCE!!

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