You’ve read the books and subscribed to all of your favourite newsletter writers. You trade every day, but there seems to always be something missing: consistency. All traders go through dry spells – weeks or even months where nothing works – and you want to know how to break out of this slump and start having more consistent results.
You sit down one day to create a new trading strategy for yourself, resolved not to throw money at any setups again.
What type of trader do you want to become? Will you continue to follow the advice of others without thinking for yourself, or will you question everything new? What made these systems successful in the past? Which time frames are effective for which strategies?
When you respond to these questions, a new sense of self-assurance starts to grip your trading. It’s in your bones that this is where you’re meant to go.
Here are three of the most frequent blunders that new traders make on their way to continuous profitability:
Greed on Every Setup
It’s a brutal mistake to avoid when you’re new to trading. Still, it’s important to remember that the time frame in which you make your decision about trade is just as important as the price level at which a particular trade becomes profitable or unprofitable. When you start trading, it’s easy to get caught up in how great it feels when everything is working out and forget about the bigger picture.
Like gambling at a casino, this type of thinking can lead to significant losses very quickly, especially if you’re not paying close attention. Ultimately, greed leads to impatience, leading to more bad trades that feed into that all-too-familiar cycle of frustration.
Lack of Patience
The second problem with new traders is that they often don’t realize how important it is to remain patient during a trade. Getting the timing right on your entries and exits makes all of the difference in the world, even when you’ve already picked an appropriate price level for your entry.
When you’re staring at a chart waiting for that setup to come into play that you know will be perfect, it can be hard not to over-analyze every single detail of every bar. Familiar mistake traders make getting into trades too soon because they can’t stand waiting. It’s important to remember that being early isn’t being wrong – being late doesn’t necessarily mean being wrong either, especially if there are still signs of weakness on the chart. You need to stay patient and let the market come to you. If you’re following your trading plan, then there’s no reason not to wait for that perfect entry.
Not Adjusting Your Stops
It’s an issue that stems from both problems mentioned above – lack of patience and getting greedy. In most cases, traders only begin to protect themselves from taking a loss when they notice their position moving against them. However, they don’t adjust their original stop-loss order as the risk increases with every tick. It’s prevalent for traders to get in a bad mental state when their position is against them, and they doubt themselves.
They often convince themselves that the trade will eventually work out and end up holding on too long to save face. The best way to avoid this problem altogether is always to remember where your stop-loss order is before you enter any trade – adjusting it if need be or setting a brand new one – and checking it periodically during your session.
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