Two Common Mistakes 90% of Traders Make and 2 Rules to Overcome Them
We’re going to review two mistakes that all traders make, and I’m going to offer you a shift in perspective that may help you reduce those errors. Even with a great trading plan in the beginning, I was unable to earn a profit because I was making mistakes on both my losing and winning trades. This thread may provide a shift in perspective that will help you if you’re making the same mistakes where you’re losing more money than you should have and not making as much money as you could have.
You can learn to apply the repeatable laws that grow money and help you become wealthy over time in just 10 minutes. Getting wealthy is a matter of making money, keeping it, and then growing it over time. Even if you’re making money by working at a fast food restaurant, you can get rich over time if you simply develop the habit of saving just twenty dollars a week and carefully make those savings grow with just a little bit of interest compounded year after year. When you start taking smaller losses when you’re wrong and larger profits when you’re right, you end up creating a cycle of steady growth for your investments. You can trade larger volumes then, and you can dramatically expand your future wealth potential
The problem that most people have that prevents them from becoming wealthy is that they do not feel good about keeping their money and have not practiced feeling good about watching their money grow; instead, we feel good by spending our money, and the slick sales messages from debt pushers get us to buy it now with easy payments, and then we end up paying interest on that purchase, which in effect is compounding the growth of someone else’s money. Keep reading the other thread in this series as a way to reinforce and practice rehearsing the good feelings about keeping your money and the good feelings of watching your money grow.
Before we can truly overcome the two mistakes that all traders make, we need to understand them. This understanding comes from learning new knowledge and then from practice.
Mistake number 1:
The first category of mistakes are those that we get punished for. We get punished by losing more money than we should have. Most people will learn from their mistakes over time, or they will simply stop trading because it isn’t working for them. We’ll cover some specific strategies to help you prepare in advance to keep your losses small. It’s not wrong or incorrect to take losses in trading, but if you make the mistake of dollar cost averaging, which we’ll cover in a moment, your losses are always much larger than they should have been.
Mistake number 2:
The other category of mistakes is harder to identify because we don’t get punished for them. We may never be aware of this mistake. Because there’s never a signed post that pops up to say you didn’t get all these extras later. In this thread series, I’ll review a pro tactic that overcomes this mistake and helps make your winning trades even bigger.
So if you’re making the mistakes where you’re losing more money than you should have and you’re also making the mistakes where you’re not making as much money as you could have, then you want to break even in your trading, but you’re really struggling from day to day, and I know it’s tremendously frustrating for you; I’ve been there. You can overcome these mistakes; it will take some practice, but it is so worth it.
Why do we make these trading mistakes? The reason we make these two categories of trading mistakes is fear, greed, and a lack of knowledge. The successful trader feels fear and greed, and the unsuccessful trader feels fear and greed as well. The difference is that the successful trader feels fear and greed at opposite times to the unsuccessful trader.
Here are a couple examples to illustrate this point. Let’s take a look at some of the mistakes we make when we’re losing. Let’s say we have two traders who enter an identical trade at the same time, and it goes against them. That is, they buy the same coin at the same price at the same time, and the price goes against them right away. The successful trader is fearful of losing money, so he sells out of the position quickly. The unsuccessful trader becomes greedy as they realize the price is now lower than it should be. So really, I’m only down 10 x. and such a trader might begin to imagine potential profits as a way of avoiding dealing with the current loss.
When prices go up, I’m going to make such a killing because I’m in this position when it’s even a better bargain. The reality is that this trader is not managing risk correctly. Should the price continue to go down, the trader now has a larger position. If they’re losing as the price goes down, he may eventually get to the point where he’s feeling so much pain that he has to get out of the position no matter what, and of course you end up with a much larger loss.
Let’s look at the second example, where both traders buy the same coin at the same time at the same price and it meets their expectations, resulting in a profit for both. The successful trader now feels greedy because he’s been proven correct, and so he buys even more of the coin to have a larger position. The unsuccessful trader, on the other hand, may be fearful of losing his profits and cash out the position too soon as the price continues to go in the direction they both desired. The unsuccessful trader will now feel even more anxiety watching the price go and they’ll head into the next trade with even more uncertainty, fear, and doubt, and so many traders get killed in the market by making the mistakes that cause greater losses.
Both of these errors are the result of trying to do the wrong job. Most new traders believe they are responsible for making money and trading, but that is not our job at all. Successful traders understand that our job is all about risk management, reducing risk on losing trades while increasing risk on winning trades.
If you’re having trouble with your trading — surround yourself with successful traders. You can gain knowledge and develop the habits of successful traders now that both paper trading and back testing are a great place to start. You can learn and prepare for each stage of the trade without risking real money, but a simulation lacks realism. Paper trading and back testing do not take into account the important emotions of fear and greed, which are frequently the root causes of what makes good trading. Traders make bad choices and lose money.
We’ve covered a little bit about how fear and greed may hold you back and cause you to lose money. In a later posts, we’ll cover 2 RULES on how to overcome fear and greed in your trading.
Rule number one: https://medium.com/@L1ZLe/double-your-trading-success-with-these-two-simple-rules-9bde2ff81ec4
Rule number two: https://medium.com/@L1ZLe/maximize-your-crypto-profits-the-proven-strategy-for-exploiting-market-extremes-d10c6fa5b74d
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