I am 100% guilty of saying every single one of these statements at some point during my trading journey. That is why I can show you how ridiculous each of these statements are.
If you are saying some of these things, then I will also show you how you can correct your mistakes. However, if you don't see anything wrong with these statements now, then please don't quit your day job yet (and also see #19).
Before we get started, don't take any of this personally. What I'm saying might sound harsh at times, but it is the truth.
I only have your best interest at heart.
1. I'll Make It ALL Back on the Next Trade
If you have ever said this, then you are well on your way to becoming a martingale trader.
…and those traders are the opposite of successful.
Trying to make too much profit on any one trade is the reason why so many traders blow out at least one account. Most professional traders that I have interviewed don't risk more than 2% of their total account on each trade.
Remember that if you risk 10% of your account on each trade, it only takes 5 losing trades in a row to lose 50% of your account. Then you will have to make 100%, just to get back to breakeven.
Some of the best traders in the world make 100% a year.
As an aspiring trader, you need to focus on losing as little as possible…because you will lose.
2. My Broker Ran My Stops
Classic, classic newbie statement. Can brokers run stops?
But most legit brokers won't because they don't want to deal with the headache if they get caught.
The more likely scenario is that you set your stop way too tight, you took a bad trade or it was a good opportunity and it was simply a losing trade.
Stop blaming everyone else for your losses. Take responsibility and figure out what really happened.
3. I've Lost 5 Trades In a Row, so I'm Due For a Big Winning Trade
Ahhh, gambler's fallacy at it's finest.
This idea of you are running out of “bad luck” is complete nonsense. Have you ever lost more than 10 trades in a row?
…and if I had kept risking more after each loss, I would have blown out my account.
So don't count on your next trade being a winner, just because you are on a losing streak.
It could be 10 in a row.
I've found that the two-strikes rule will stop you from going down the rabbit hole of doom.
4. My Entry is Late, But There's Still Some Room
Ever find yourself trying squeeze 1R out of a trade, when it's not really there?
Chart by TradingView
You might be tempted to take the trade, even though it is a little late. As you can see there is about 0.91R available, making the trade less than optimal.
If you take the trade, you could be in for a world of hurt.
Remember, there is always another opportunity around the corner. Be patient, because it's all about the entry.
5. I Trust My Trading Instructor Completely
Get a proper trading education.
…but don't trust any instructor completely.
I'm not saying that they are scams.
In fact, I believe the opposite. You can usually learn at least one useful thing from a trading course.
Even a bad course.
But there are many reasons why learning another person's trading system is only half of trading success:
- It might not work for your personality
- You will probably have to tailor it to fit you
- You may have to piece together several trading systems
So learn everything you can from as many trading instructors as possible. But their method isn't the only way.
6. The News Messed Up My Trade
No, Erin Burnett did not mess up your EURUSD trade.
The more likely scenario is that you forgot to check the news before you placed a trade.
Be honest with yourself.
…or if you are a purely technical trader, then you just have to accept that getting stopped out happens occasionally.
7. I Need a 4K TV for Trading
Nobody needs a 4K TV for trading.
I've found that if someone geeks out way too much about tech, they are usually procrastinating and they should be doing more important things.
…or filling out their trading journal.
Of course, there are people who love to play with tech, like gearheads love to work on cars. If that is the case, then knock yourself out.
But if you all of a sudden decide that you need an expensive TV (or two) in order to trade better, then that can only mean one thing.
There is something else that you are avoiding.
Ask me how I know that 🙂
8. Only a Custom Computer Will be Fast Enough For My Trading
On a related topic, I've seen a lot of discussion on the forums about choosing the ideal trading computer. Some people think that they need a custom built, 12-core processor that runs on a nuclear power plant.
The reality is that most middle to high tier consumer computers are more than enough for most traders. If you must have a PC or are strapped for funds, then I recommend a Dell laptop. I trade with a MacBook Air.
You can also get both off eBay for a very reasonable price.
If you are running 3 trading platforms, 5 news feeds, a trading algo and 8 monitors…then you may need a custom built computer. Anything less than that is pure procrastination.
9. I Will Exit if Price Gets Back to Breakeven
This is the classic “Click and Pray” trading strategy, or the SWAG trading method, as I like to call it.
If you ever find yourself praying that the trade will get back to breakeven, then you are probably the proud owner of a soon-to-be losing trade.
So if you find yourself saying this on a lot of your trades, then you need to revisit your testing and be more comfortable with the risk.
10. The First Thing I'm Going to Buy With My Trading Profits is a Ferrari
I've talked to or heard from about a dozen people who have actually bought a Ferrari. All of them have said that it's a terrible car to actually own.
Sure, it can be pure bliss for that hour you drive it around. But it will need constant maintenance and will probably be broken more than it is working.
The traders at the hedge fund I worked at drove Porsches.
It seems like once you get to the level where you could get a Ferrari, you also understand that there are actually better cars out there.
11. I'll Donate to Charity, Once I Become a Successful Trader
This one always makes me cringe. You can donate to a charity right now.
Even if you only have $1 to spare this month, you can give it to a cause you believe in. People with an abundance mindset understand this. You need a healthy abundance mindset to be a successful trader.
Here are some charities that I support.
Get started now.
There's no excuse for waiting.
12. I Don't Need a Trading Journal
I fought a trading journal for years, so I can speak very personally about this one. Keeping a trading journal is the only way to understand the mistakes you are making and the trades you are missing.
Without it, you are going to keep repeating the same mistakes. One thing that I discovered was that I was picking quite a few winning trades, but I was bailing out too early.
This one discovery alone was a huge boost to my performance.
13. I'm Not Going to Wait for this Candle to Close
Quick…answer this: When is a Pin Bar not a Pin Bar?
When it hasn't closed yet!
Slow down and make sure that your pattern is actually a pattern. Those patterns give you an advantage.
Without them, you are just gambling.
14. Trading Psychology is Not Necessary, I Just Need the Best System
Yes, the classic “holy grail” mentality. I love this one.
If you have ever said this, you are probably in your first year of learning to trade.
Psychology is the most important element in trading. You can listen to me or learn the same lesson 5 years down the road.
15. The Risk I Take Depends on How Sure I am of the Trade
OK, in all honesty, I have seen this work. This guy does it and he is very good at it. In fact, he will risk up to 10% on a trade that he is very sure of.
But for most traders, this is a recipe for disaster.
For 98% of traders out there, a fixed-fractional risk management system is usually the way to go.
So if you hear these words leave your mouth, then you probably aren't ready to go pro yet.
16. I Don't Understand How That Guy Trades But It's Complicated…So It Must Work
No joke, someone actually told me this at a meetup once. He had been studying a system for 6 months, and still didn't understand how it worked.
Blew my frickin' mind.
If you can't grasp how the system works within a day or two, you are probably not going to be successful with it. Now, I'm not talking about trading it successfully.
I'm talking about knowing when to enter and exit.
In my experience, the best trading systems are easy to learn.
But they are all tough to master. This is because you need to master your emotions, not the actual trading system.
Don't get me wrong, there are some really esoteric systems out there and apparently some of them work. Astrology trading falls into that category, for me.
But guess what?
Are you going to master anything that you don't understand?
Of course not.
You aren't dumb for not understanding, simply find something that you do understand.
I could try to make a living as a nuclear physicist, but I don't understand physics and would fail miserably. Should I take that personally?
No way, I'll just go find another job.
17. The Markets are All Random
A college-trained economist will usually try to convince you of this. But if they are honestly convinced of this, then they probably aren't trading either.
…or they may have a gambling addiction.
Either way, anyone who believes this should not be trading.
18. I'll Use Proper Risk Management, Once I Build My Account to a Decent Level
How do you think you are going to get your account to a “decent level?”
Lucky rabbit's foot?
Proper risk management is the cornerstone of profitable trading.
19. I'm Going to Quit My Job So I'm Forced to Succeed as a Trader
This might work for other businesses, but this is the absolute worst thing that a trader can do. The reason is that trading is a very psychologically demanding profession.
If you are under pressure to make your mortgage every month, you aren't going to trade well. Keep in mind that if you can make 1% a month when you are starting out, you are doing really well.
But you won't make that every month. So let's say that you make an average of 0.5% every month.
Now figure out how big of an account you will need to cover your living expenses.
Yeah, more than you thought…right? This reality check is something that Rafael teaches in his course.
20. If a System Works on the Daily Chart, I'll Make 10 Times as Much Money on the 30 Minute Chart
But in reality, trading a shorter timeframe is a much different animal. It is possible to profitable on any timeframe, but you need to master the nuances of each one.
Trading on smaller timeframes usually leads to over trading and general insanity. Just kidding, that's how I feel.
However, don't think that all trading systems will be tradable across all timeframes. Learn your Trading Timeframe Personality and stick with it.
You will thank me later.
21. Stop Losses are for Pussies
You need to have a stop loss. I can be a hard stop loss, or it can be a mental stop.
Either way, the only way that you are going to be successful is if you learn to limit your losses and letting your profits run.
Using a stop loss is not about being macho.
It's about being a professional trader.
22. I'm Going to Completely Automate My Trading
This is possible.
But I honestly believe that only a very small portion of the population of traders are cut out to be completely automated traders.
I think that your mind has to be wired in a certain way to truly understand the implications of automated trading. If this is your goal, then like I said, it is possible.
However, it is usually easier to come up with a profitable manual trading system and automating that, than it is to start with an automated system from the beginning.
So consider automated trading, if that interests you. But it is not the end of the world if you can't make it work.
You can also do incremental automation, which can make your job easier, but still gives you a lot of control.
23. That Was So Obvious, How Did I Miss That?
This is the classic hindsight bias.
You aren't going to catch every single trade. So chill out and let them pass.
There is another opportunity right around the corner. Beating yourself up will only lower your confidence and probably cause you to miss the next opportunity.
That setup might also have only been obvious, after the fact.
Keep that in mind too.
A good exercise to do is to scroll your chart back to the point when the setup happened. Is it as obvious now? If yes, then figure out why you missed it.
If no, then let it go.
Forward testing also helps a lot with this.
Need help spotting trades while you are busy? An alert indicator can be a huge help.
24. My Last Trade Was a Loser, I'm a Loser
You need to learn to forgive yourself.
The forgive yourself again. Trading requires mental toughness. That is the only way that you can move forward.
This is a lesson that took me a long, long time to learn. You need to be your own cheerleader.
Nobody else is going to do it.
25. That Trade Lost Money, How Could I Have Made It Profitable?
Trading is about winning and losing. If there was a way to only win, they would call it printing money.
Unfortunately, losses are part of the deal.
So stop trying to figure out how to turn lead into gold. A losing trade can be a good trade too.
26. Why Did I Hesitate Taking That Trade?
The answer is because you don't have confidence in your trading system.
I wish it was more complex than that, but it isn't.
In order to gain more confidence in your system, you have to backtest and forward test your strategy before ever risking any money. This will give you more confidence than anything else I have ever seen.
27. I'm on a Roll, It Makes Sense to Increase My Risk
This is the “hot hand” syndrome that usually leads to giving back all of your profits for the month.
…or maybe even the year.
While the trend could continue, it is much more likely that it will start to chop around or reverse. To prove this to you, take any trading system and backtest it.
First trade it with regular risk. Then test it so that you raise the risk by 50% when you win 3 trades in a row.
Compare the results.
28. I Lost Money Trading That Market, I'll Never Touch It Again
Yeah, blowing out an account hurts. I've never blown out a trading account, but I have lost money in the real estate market, which I talk about here.
That's when I told myself that I would never buy investment property again.
But when I step back and consider that statement, it doesn't make sense. It market didn't suck…I did.
I simply was not good at it. If others are successful, then I can be too.
It is just about learning the skills and having the tenacity to figure it out.
29. My System is Fully Backtested, There's No Way It Can Fail
There can be a big gap between backtesting results and actually live trading results. Some of the reasons for this can be:
- You are not awake to take trades in live trading
- Market conditions have changed
- Your backtesting used too small of a testing period
- The way you react with real money on the line can be much different than with play money
- And more
That is why you also need to forward test a trading system after you backtest it. The past will give you clues as to what will work in the future, but it's not set in stone.
29. I'm Going to Get Rich With This Trading Robot
I went through my trading robot phase, like a lot of other people. On balance, I actually made a little bit of money with the robot.
But in the end, I decided to stop using it. The reason was that the creators kept changing the “optimal” settings every month.
That didn't sit well with me.
The fact is that if you didn't design the robot and you don't know how it works…
…then how do you know when it has stopped working.
Ponder that for a minute and I think you will realize that all commercial trading robots are built to fail.
30. Before I Enter a Trade I Need to be Absolutely Certain it Will be Profitable
This is what left-brain dominant people usually say. They will need 5 kinds of confirmation, before they can enter a trade.
Usually, this means that they have 20 indicators on their charts and are watching the news to be extra sure.
Trading is essentially the skillful management of the unknown.
The sooner you can understand this, the sooner you will do what it takes to be successful.
31. Even Though I'm Losing, I'm Going to Increase My Position Because the Price is Even Cheaper Now!
This is dollar cost averaging. It can make sense when you are building a long-term position in a stock. But in active trading, this is just throwing good money after bad.
Keep your risk constant and honor your stop losses. Once you are out of the market, you can think with a clear head.
Sorry to break it to you, but if you find yourself saying these phrases on a regular basis, you are probably not ready to become a professional trader.
Not to worry, it is a process. It doesn't happen overnight.
Everyone who is successful at trading right now, put in a lot of work to get there. So start with a course or two and get on it!
You only fail if you quit.
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