A Trader’s Ten Worst Enemies
01. Stubbornness: Not cutting losses short and sticking with a trading method that does not work.
02. Arrogance: Believing that you are far smarter than the majority of market participants before their is any evidence that you really are is very dangerous.
03. Opinions: The only opinion a good trader should hold is what they believe the price action is telling them after they have done the research of historical prices. Opinions about the future are useless unless you posses a fully functional crystal ball or time machine. Trading the price action in the present moment is what leads to success and profits.
04. Bias: Getting stuck in bull mode or bear mode is dangerous and can lead to losses if you keep playing on a team that is losing day after day. Stay flexible in your trading and go with the flow you can spend both bull and bear sided profits the same way.
05. Euphoria: The moment you feel invincible and like a genius is the most dangerous moment in your trading, that is the time when the most stupid decisions are made, stick with your trading plan at this crucial moment and stay grounded in probabilities and risk management.
06. Anger: An angry trader is almost always a bad trader, the emotion usual skews the traders perspective and leads to trading out of revenge and trying to get back to even quickly after some losses. Trading bigger when you are trading badly is not a good plan at all.
07. Adding to a losing trade: Making your losing trades bigger makes you want to hold them longer and start hoping for a rebound in your losses. This is trading aggressively against the trend in your time frame and usually does not work out. The mental risk of ruin is also great when you make a loss bigger and bigger and hold it for a long time the stress can break a trader.
08. Chasing a trade: If you miss a great high probability entry and then it runs away from you it is usually a bad thing to chase it. As it runs away from your entry level the risk/reward starts getting skewed and you have to plan on what level will be the next great set up and be patient.
09. Trading TOO BIG: If you take on huge position sizes that put you at a risk of ruin if you have a string of a few losses and cause tremendous amounts of stress then you are dooming yourself to eventual failure, not if, it is just a matter of when the big trade goes very bad or the market environment changes and a losing streak destroys your account quickly.
10. Themselves: A trader’s ability to control themselves will determine their long term success more than any other thing. A robust trading system can be created after enough research and testing but even then you still have to be able to follow it in real time and through frustrating market environments. The biggest enemy you will ever face on your journey to trading success is yourself.