17 Mistakes that Could be Making YOU a Losing Trader

Hi folks! This is Nathan Tucci with an article I believe everyone should read. With that said, please read, comment and share! Thanks!

 

Everyone knows there are TONS of traders out there losing money–we hear the stat CONSTANTLY: 90% of traders are losing money (or 93 or 96 or whatever number they come up with).

Truthfully, I have no idea what the percentage actually is, but I do know that it is high. I know that I have dealt with thousands of traders, and almost none of them have made any money trading despite their efforts.

It’s a sad thing to be honest, but I believe that the majority of these losing traders are in the position for the same reason…. and it’s not because they are so far off from understanding “true Forex trading” or because they have not discovered “George Soros’s little black book” or because they need to uncover the secret of “front-running the banks.”

Instead, I think the issue is that the average trader just makes a lot of little, dumb mistakes that add up to an unprofitable trading career. Admittedly, some of the mistakes I will mention are bigger, but for the most part, our readers understand Forex Trading pretty well and even have their heads on straight with things like risk management and having a trading plan; they are just missing the mark on a few things here and there which (unfortunately) is enough to make you a very unprofitable trader.

It’s like Baseball.

19883865_m

Baseball is a sport with a small margin for error (the best players in the world get a hit 1 out of 3 times!), so just 1 or 2 tiny things being off  can make you look like a terrible hitter even if you’re actually very close to being great–this why professional (even the best ones) hitters regularly go on streaks where they look terrible at the plate.

The good news is, if a hitter cleans up these dumb, little mistakes; all of a sudden he looks pretty good.

See, that’s how trading is. The overall picture of your trading success is your account:

Does it make money or lose money? …  BUT it is often little mistakes that decide what that big picture looks like.

Let me give you one more example before I dive into the specific points–I want you to understand the logic and the reason behind this, because if you don’t, the points in this article won’t mean a darn thing.

Imagine this:

A Pilot is put on a mission. The Pilot needs to take a package from New York City to Los Angeles. Of course, anything short of being IN Los Angeles to deliver the package is complete failure. The Pilot is not rewarded for getting close…

But along the way, he makes a TINY navigation mistake. The plane takes a course just a few degrees off the correct one; here’s what happens:

Small Mistakes

When a small error is made, the Pilot ends up in the wrong place. Even though San Diego is pretty close to Los Angeles, and even though the pilot did MOST everything right, he still ended up with a completely failed mission. Notice that the pilot didn’t need to crash the plain or fly in the opposite direction to fail; he simply made a minor mistake and didn’t correct it before he ended up in the wrong place.

I believe that describes a lot of traders who are struggling. Sure, some of them are crashing and burning with no clue how to fly; however, many of you reading this post are very close. You just need to clean up a few minor mistakes and you’ll start ending up in the right place.

The tough thing about trading and baseball and flying is that the small mistakes can make you feel like you are really far off when you’re really not. So I want to encourage you; odds are that you’re closer than you think.

With that in mind, I’d like to bring up 17 mistakes that could be stopping you from landing at a profitable destination.

 

17 Mistakes

1. You don’t actually know why the market moves, just that it does.

This is a pretty common mistake. Many struggling traders know a lot about Forex, but they actually have no idea what determines price movement. Study up on supply and demand, how pending orders fill market orders, how the banks and brokers deal with volume, etc. A more complete understanding of how the Currency Market works can give you that little edge you need to push your way into profitability.

 

2. You trade on one time frame.

A lot of traders “learn an hourly strategy” and simply watch that one time frame and attempt to trade from it using the strategy criteria. Stop. Learn to look at the entire market. It’s okay to zero in on a certain time frame to determine your entry point, stop loss and take profit, but being stuck in one time frame for your analysis will lead to a lot of unnecessary losses. Multiple time frame analysis can be one of the best filters for a trader and eliminating bad trades is the difference between winning traders and losing traders.

 

3. You don’t know your winning percentage, risk/reward, average trades per month, or expectancy.

Get to know your trading. Understand the details of your strategy so that you can make the tweaks necessary to turn a break even or losing strategy into a winning strategy. More often than not, you need to stick to a fundamental strategy and make necessary changes rather than throwing it out the door and starting all over… Which brings me to my next point.

 

4. You’re constantly trying a new strategy.

This could be the biggest problem among retail traders. Jumping from one strategy to another has about the same probability of trying to wear a different hat to improve your golf game. In other words, it’s probably not the strategy’s fault that you’re losing money! Sure, there are some stupid strategies being taught out there by fake gurus, but if you learn a fundamental market strategy (like trend continuation or break-outs) and WORK with it, you will be successful. If you change it every week, you won’t.

 

5. You move your stop loss to break even as soon as you get any profit to avoid taking another loss.

This is another small mistake that makes a HUGE difference for traders. Moving your stop loss blindly to break-even when you are up a few pips on a trade is a devastating mistake. Not only is it a tactic motivated by fear of losing (which is bad, bad, bad), but it also KILLS your chances of winning trades. A stop loss sitting at the wide open market has an insanely high percentage of getting stopped out. You’d be better off taking your few pips of profit and running (which I also do NOT recommend). This, again, goes with my next point.

 

6.  You have an entry strategy but not an exit strategy.

A lot of traders have this great entry strategy with lots of rules and filters etc. but they do not have an exit strategy. They don’t know when, how or why they should be getting out of the trade so even though they get IN to a lot of good trades, they still don’t make money. Use levels to determine your targets and don’t move your stop loss to break even out of fear. It’s okay to move your stop, but be patient and HIDE the stop behind a level once one is formed, don’t just slide it right into the markets path… my next point harps on this just a bit more.

 

7. You make in-trade adjustments that you did not plan on making before the trade.

Many traders sit at their desk STARING their trade down and making random decisions they had no intention of making until the trade was live. You should take an entry with a well-defined plan of what decisions you might be making during the trade. Some examples are HERE. This way, your emotions don’t get the best of you and you don’t let the market fool you either.

 

8. You have as many indicators on your chart as you have dollars in your account.

The idea that an assortment of indicators is going to give you the magic system is a dream. Indicators are fine and I am not even against them, but a structural trading strategy should NOT depend on indicators. I don’t know of anyone who simply leaves their trading decisions up to a set of indicators and is consistently profitable.

 

9. You’re trying to make significant gains with a tiny account.

One of the big lies in the Currency Market Industry is that you can trade with a tiny account and make a lot of money. I have no problem with practicing on small accounts, but if you are approaching the Currency markets as a legitimate investment tool, you MUST have legitimate capital to use. Depending on your goals for income, you’ll probably need 10,000 dollars or more of TRADING CAPITAL to achieve significant gains.

 

10. You’ve purchased systems, strategies, automated programs, etc. but nothing has worked.

This is a two-fold problem. The first part of the problem is that the majority of stuff sold online is crap. It doesn’t work. It will never work. It is not even made to work. But the second part of the problem is the one I’d like to focus on: If you learn strategies (maybe purchased ones) and none of them work, the problem is probably you. Some of the strategies and trading systems being sold online are actually very legitimate; it’s just that traders are too lazy to make them work and then they cry “scam” because they didn’t get suddenly rich by buying the product. I am not trying to be harsh, but this needs to be addressed because it is a significant issue. Do you really believe that 100% of the strategies being taught don’t work? … No. Half of the issue is that traders literally refuse to put any real effort or time into MAKING it work so they take the easy way out and say “Must be a scam.”

Sorry, but I don’t buy that (no pun intended). If you go to college but don’t get a job, no one calls the University a scam because the education didn’t work; yet in Forex (because there ARE many scams), anything that doesn’t work right away or work the way traders hoped it would is called a scam. So if you have tried everything and nothing worked, I would not suggest trying other things, I would suggest, trying harder.

 

11.  You read and listen to every guru on the web and try to implement every new idea you hear… but they don’t work for you.

This is along the same lines as #10, but a major difference. This is for traders who typically are intelligent and have the tools to succeed (and don’t assume all education, systems, strategies, etc. are scams), but simply are trying too much.

Let me give you an example:

A golfer is working on his swing and is almost to the point where he is hitting the ball just how he wants it. He then sees a video clip from Tiger Woods explaining how he hinges his wrists late in the swing to increase his power through the ball. Of course, the golfer now makes that change and it throws him off for a while but then he gets the hang of it and begins getting close to his optimal ball contact again. However, he sees an interview with Phil Mickleson talking about how he throws his hips to help him hit the ball further and, of course, the golfer implements that as well.

Eventually, the golfer has implemented a million things into his swing but he is just getting worse. It’s not that Tiger or Phil or any other pros lied to him–they really do use those things to make themselves better–BUT that doesn’t mean he should be doing all of those things. He’d be much better using a few concepts and practicing until he was successful than implementing every single new trick he heard, and that is exactly what many traders are trying to do.

These tricks and tips they are hearing are normally good and the pro traders really do use them, but that does not mean you should be trying to implement every single one of them into your system.

 

12. You have no strategy for Account Growth–you just want to make money.

Here’s something a lot of struggling traders don’t even think about. If you want to be a long term successful investor, you should have a specific strategy for how you want to grow your account and your net worth. For example, you may want to increase risk at a certain level. You may want to decrease risk at a certain level. You may want to pull out money to put into real estate at a certain level… Having a long term growth plan keeps you focused on your goals and helps you to not get stuck in today. Trading is not a business of today.

 

13. You decide how much to risk as you’re entering the trade.

Speaking of short term thinking… You should have  a VERY specific set of rules determining your risk. Never ever decide how much of your trading capital you want to risk as you take a trade. One of the most basic tips for success as a trader is to decide as many details as humanly possible BEFORE you execute a trade, and Risk is definitely one of those!

 

14. You constantly tell yourself that you really are a good trader, but you just haven’t caught a break.

This is called being delusional. Don’t worry, it’s a common disease among traders 🙂 … The cure? Understand that you’re simply not there yet. Practice, study, and practice some more. When you don’t need to “catch a break” to make money, you’ll know you’re a successful trader and you can get there, but you’ll never find your way to the destination if you think you’re already there.

 

15. You have no routine.

Do you have a routine? Are you systematic in your approach to trading and your approach to the market? I have never met a successful trader who was not disciplined and didn’t have a routine. Now, I don’t mean you need to go crazy–I am not talking about being superstitious, I am talking about being disciplined. Just join our trading room to see a disciplined trader in action… Chris is kinda boring which is one of the best signs to determine if a trader is really profitable. A trader that’s too exciting is probably losing money 😉

 

16. You “feel” the right time to make a trade.

If you open up your charts, watch the candles move and just “feel” the right time to get in, you’re in trouble. Planning is critical in trading and if you think you can get by just by jumping into the market based on gut feelings, trading is not for you.

 

17. You’ve decided to quit trading multiple times but keeping coming back because you know it IS possible to make tons of money.

This is the classic sign of losing traders. They get into trading, see the potential and start losing money. At some point, they say “It’s impossible, I quit.” But, in their heart, they know it is definitely possible to make good money trading so they come crawling back… and lose more.

This is good and bad. It means that you know trading CAN deliver, but it also means you are stuck in a vicious cycle of losing money. The only way to get out of the cycle is to clean up your act, get disciplined, avoid the mistakes I have mentioned in this post and stick with it. Often times, traders (and people in all different kinds of areas) quit when they are the closest to seeing success. When they come back, they are farther away and quit again before they get there. It is a sad cycle but it can be broken. Discipline and determination must be your best friends to be successful in your trading.

 

I hope this article helps you realize some of the key mistakes that are taking your flight off-course.

If you have specific thoughts or comments or questions regarding any of these points, please leave a comment and I would be glad to address them.

And if you thought this article was worth reading and that others should see it, please take a moment to share; it would mean a lot. You can CLICK HERE to Tweet it for me!

You can also Follow me on Twitter to get more updates, articles and trade ideas.

The following two tabs change content below.
Winners Edge Trading was founded in 2009 and is working to create the most current and useful Forex information and training available on the internet.

Latest posts by admin (see all)

Winner’s Edge Trading, as seen on:

Winner's Edge Trading in the news

  • Selva

    Great Article!
    Thank you Nathan for giving me the opportunity to understand how far I am to become a successful trader. I couldn’t stop laughing at mistake #11, I was a follower and I always tried to implement by trying new strategies I come across online, but I stopped doing that lately, practising one strategy that you find you are good at is what makes you perfect.

    Thank You!

  • Antonio Peruzzi

    Great, Looking like you know me and you were talking right to me, the only one error i never made is to quit, i think this article will accelerate my curve of learning.
    Thank you so much.

  • INOKenny

    Great article Nathan!

  • piphunter

    Nathan, thanks for these valuable trading tips! please give us some more of good advice! this is all very true and common for all new traders I guess, including myself. Question: can you be so kind to share with us 1-2 simple strategies to follow and apply for swing trading (4H-Daily timeframes)? in addition to Strike-Boomerang strategy of the Winner’s Edge trading Room? I can say that Strike-Boom strategy is quite OK, since it’s constantly brings profit!

  • NathanTucci

    haha… Yeah, that is a common one. I figured a few people would appreciate the golf reference 🙂

  • Wong Jun Jek

    point 11 got me.. lol

  • NathanTucci

    Thanks for the comment, Tim… I was talking to myself as well.

  • NathanTucci

    Hey Chris, thanks for chiming in. You are exactly right and I really appreciate the comment and sharing it around!!!

  • NathanTucci

    Thanks! Glad you liked the article

  • Osita

    Many thanks, Nathan! You have touched on a number of familiar issues! Great article!

  • Chris

    Hey Nathan!

    Great article! I whole-heartedly agree that in many cases the difference between a small loss in one month versus break even OR a break-even month versus a profitable month can vary due to just a few key moments where the trader was not trading at an appropriate level (nice examples with baseball and pilots!). Small mistakes can add up and become an important culprit of reaching success. Once traders have tasted profit more regularly, then the discipline starts to set in because the realization has “hit” that its about correct implementation of details (assuming the vital basics are all covered and done correctly).

    Thanks for pointing this out! Awesome job. Chris