What are the 10 major mistakes that these traders make that cost them dearly?
1. Having no trading plan
When you don't have a plan, you don't have a template to follow. It becomes very costly when your emotions are high and you have to make decisions on the fly.
2. Using strategies that do not match your personality
You hear of a trading strategy that has worked very well and you are anxious to follow it. One important factor to consider is: does it match who you are and your lifestyle?
3. Having unrealistic expectations
Most traders assume that it is very easy to make money in trading. They have unrealistic expectations with regard to their initial capital, their risk profile and how much money they can expect to make.
4. Taking too much risk
Usually when traders are down, they want to make their money back very quickly. Therefore, they increase their position size without thinking about the risk/rewards.
5. Not having rules to follow
Most traders think if they have rules to follow, they are restricting themselves. It is on the contrary. Having rules allows you to be more flexible since you have thought about lots of issues beforehand.
6. Not being flexible to market conditions
It is very important to see the markets as they are and not as you want them to be or as you assume them to be.
7. Failing to take responsibility for your results
When the results are not in your favor, the tendency is to blame the markets, circumstances, advice of others... When you blame things outside of yourself, you become a victim of circumstance. When you take responsibility, you can react differently to your circumstances and become the success you know you can be.
8. Being addicted to volatility
One of the reasons that people get into trading is because they like the excitement of it. If there is no excitement, they create it. This is one of the reasons that traders sabotage themselves.
9. Not having a process to keep track of your performance
If you don't keep track of your results, how do you know what has worked and what has not? How can you tweak your process to get the best results that you can?
10. Not dealing with your Emotional Risk
When dealing with money, there are lots of emotions involved. Emotions are part of everyday life. What separates the successful traders from others is how they react to their emotions.
So what can you do to become a more consistent trader and increase your profitability?
1. Think of trading as a business and have a trading plan.
2. Make sure that the strategies you select, match your personality so you can follow them.
3. Have a realistic expectation of what your returns are. Include all the costs associated with your trading business.
4. Have an idea for your risk/reward ratio. Don't confuse trading with gambling. If you are increasing your position, make sure that your strategy warrants it.
5. Have trading rules and follow them. Think about them as contingency plans. Because when your emotions are very high, the tendency is that you make very poor decisions that can cost you your account!
6. Be flexible to the market conditions. When you see the market as it is, you have a much better chance of managing your portfolio and increasing your profits.
7. Take responsibility for your results. Taking responsibility does not mean that you have control of everything that happens. It means that you have a choice of how to react to the things that happen.
8. Find out why you are in the trading business. If it is for the excitement of it, find other hobbies or activities that you can get your excitement from.
9. Keep track of your performance. This is a way of objectively looking at how you are doing, what you did right and what you learned. Be gentle with yourself.
10. One of the most important things that people don't handle is their Emotional Risk. When emotions run high, the quality of decisions goes down. It is very important to learn how to react to your emotions and thus increase your profits.
--Courtesy
Yahoo Finance
