15 Mistakes of Unsuccessful Traders

Discussion in 'Psychology' started by tradementor17, Dec 1, 2011.

  1. 1) Always wants to be in the game .. more time means less money
    2) Wants money quickly .. you can’t control the market
    3) Finds it very inexact – which system – how much to risk - there are no hard and fast rules ..
    using a positive expectancy system with a clear edge will work out over a period of time if risk is proportionate

    4) Finds it boring to trade small
    Since no trade is a sure thing and even with positive expectation, it is possible to have a string of 10 consecutive lossees. It is important to risk less to give probabilities a chance to work in your favour

    5) Wants immediate gratification – can’t wait
    You don’t control the market

    6) Keeps looking for new indicators/systems – the sure system
    There is no definiteness..

    7) Keeps trying new indicators
    Nothing works all the time

    8) Keeps switching between different techniques – he wants the techniques to work 100% of the time
    Nothing works all the time.. Instead stick with a few proven systems and trade them all the time

    9) Very Adventurous
    You are here to make money and not for thrills

    10) Wants to make big money overnight.. Multiple positions – excess leverage
    Since you can never be sure if the next trade is a winner or if the next 10 trades are losers, why would you want to risk too much

    11) Lusts for that feeling of making money
    Lust for money is good but there are no shortcuts

    12) Trades when there is no liquidity – fear of missing out
    Don’t fear missing out since you may miss out on a loss too which is a good thing :) and less time at the desk is better

    13) Chases market – fear of missing out
    Same as 12)

    14) Wants to know all techniques
    It doesn't help to know more.. What matters is that you apply a tested technique over and over again.. No one has the capital to trade multiple systems

    15) Understands probabilities but lacks discipline to apply same system
    Needs to understand that the key is to apply the edge over and over
  2. in trading, there is only one mistake.

    all others are brothers and sisters of the mother mistake: do not follow rules.

    market is an unstructured environment, no ending moving, at this moment it is trending down, but just you turn around, it is trending up, or suddenly moves in random mode, or suddenly it moves according to classical textbook describtions,....

    it is full of uncertain. in this kind of environments, experience does not count. why, you can not use experience to judge things. yesterday, you bought a dip, it rose and you gain. but today it may continue its drop after your purchanse.yersterday you sold a pullback, it broken down just you sold, and you gained. but today after you sold, it came across resistance and bounced hard, and you are forced to cover at higher price.

    because of this fact, people normally either hesitate or look for new strategy/idea( they learned something from the loss/gain) when they see the silimar setup occurs, in one way they freeze, they are afraid of losing (particularly if they have similar experience). in anorther way, they want to join the wagon and ride to get the profit. they are stuck. they feel stupid/naive/cheated if wrong, they feel at loss what to do. so they created many mistakes.

    first they need get a better understand about the market: consider all the possibility(zillions of possibilities), not just the wish/hope, then clearly define rules to limit yourself into those rule defined structured environment, the simple the better, and easier to carry out. for example, $300 maximum loss a day,if you strictly follow this rule, you will not concern yourself lose thousands when you get in a position. it is predicatble and manageable.
  3. All good advice, but there is one mistake that will kill you above all others: letting a loss run. If you can just avoid letting losses turn into huge losses, you can do well.

    A corollary is to avoid big drawdowns at all costs. That means not letting big profits turn into small ones or letting small losses turn into big ones.

    Easy to say, hard to accomplish.
  4. Mistake #16

    Not knowing yourself well enought to control your emotions.
  5. That is incorrect. The biggest mistake of all is thinking you have a positive survival rate in the long run... (Remember ZeroHedge.com's motto/tagline?) ... when you are engaged in sinful behavior.

    That is b/c trading is a sin whereby traders attempt to assassinate others online/virtually in order to gather their spoils ("thou shall not covet thy neighbor's property (nor his trading account)"...)
  6. Yes ! In summary the root of the problem is not following rules but when you examine the typical scenarios and the way they play out, indiscipline is the symptom of a deeper problem and we take a symptomatic appoach while treating it..

    The typical trader after a few blow-outs begins to realize that a System, good trading psychology and MM are important. He then tries to trade a system that he believes has a positive expectancy. He may have even backtested it but then he has trouble sticking to it when the system doesn't behave exactly like he anticipated. Once he begins to doubt his system, he loses control and is driven by emotion - he starts trading in a discretionary manner, overleverages himself most times and than digs himself into a deeper hole ..

    The need to have a system that you believe in completely is key to being succesful. It could be a method but the framework for analyzing price action should be crystal clear and keep you out of the bad trades
  7. What do you consider a Bad Trade? If you follow your system they are all good trades; just some with bad results.:)
  8. Nothing wrong with that. More time in the market means more money for good traders. False

    Disconnected premises. Nothing wrong to want money quickly. Of course you can control the market. It depends on how much money you got. False

    Cannot separate expectancy from risk management. False

    With a win rate of 60% your chances of 10 consecutive losers is a mere (0.40)^10, or 0.0001048576. It is important to risk more if you are sure about a win rate of 60%. False

    Already discounted as False

    Disconnected premises. You have to always look for new systems as old edges slowly dieFalse

    Another set of disconnected premises. Best systems switch between different sub-systems depending on market conditions. Never say "nothing". False

    Why are you spoilling the party? False

    Thanks but even kids know that. Irrelevant premises, disconnected. leverage kills the idiots and makes wealthy the wise. False

    Lust for money is good but money never last. False

    Yeah, the best traps are set when there is no liquidity. False

    False same as 12

    No one? Never say "no one". False

    I don't understand. I had to come to the end of this to find out that traders must understand probabilities? That they must have discipline? That they must apply an edge?

    All meningless presmises of course unless the probability is calculated, the discipline is exercised and the edge is found. Meaningless

  9. Alcoeus


    Ah the blackhole that can suck a new trader in.. like a vicious endless cycle where years pass and you get nowhere. The worst is if you don't realize this and keep going thinking you're progressing when in reality you're nowhere closer than when you started years ago.

    I think this is different for a new vs already successful trader though to address the above post.
  10. +1
    #10     Dec 4, 2011