3 Trading Mistakes Successful Traders Avoid

Trading mistakes or success hinge more on mastering trading psychology than the best tools, high capital, or expensive training courses. Business coaches love to say “fail big or go home!” That statement drips of motivation, but it’s not practical in the trading world. Failing big means losing $10,000, $20,000 or even a million dollars. No thanks. On the other hand, If you’ve ever traded real money, you know we all make mistakes. Believe me, I’ve made plenty of mistakes when it comes to trading. I try to learn from them. I also try to learn from other traders. In the course of running my two trader-focused businesses (trader coaching and trading computers), I have had the opportunity to observe plenty of traders. And I've gotten pretty good at predicting which ones will succeed and which will fail. It doesn’t have anything to do with which brokerage they choose, or which software they choose, or even what instrument they trade. Instead, it has everything to do with trading psychology. Who would have guessed? Success in trading comes from what goes on between your ears… long before it translates to how much money lands in your bank account. Here are the top three psychological traps I have observed in traders who are just breaking even, or have blown up their accounts.

Trading Mistake #1 - Failing Traders Beat Themselves Up

After a trader loses money (aka, experiences a draw-down), failing traders continually beat themselves up. They never recover or improve their trading psychology after their draw-down. These traders go through what almost looks like grief. They personalize the mistake and they make it permanent in their mind. You needn't beat yourself up on performance as long as you're sticking to your trading system. Consistently following the rules of your chosen system is what counts in the long run. Successful traders make mistakes and move on. They never repeat the same mistake twice. Consequently, they always make a big comeback.

Trading Mistake #2 - Failing Traders Chase the Holy Grail

The Fear of Missing Out, or ‘FOMO’ as is often referred to, is the second biggest cause of failure. Traders get into deep trouble when they adopt a habit of always chasing after a better get-rich-quick mouse trap. Every time they take a small loss, they're looking for a new strategy. That always gets them into trouble. No strategy will ever succeed on every single trade. There are many ways make money in the market. However, if you adopt one trading strategy this month, only to throw it out next month for a new one, chances are you’ll fail. Successful traders adopt a strategy and stick to it. They dedicate themselves to learning their strategy thoroughly to the point of becoming an expert. Their consistency gets them better results.

Trading Mistake #3 - Failing Traders Focus on What They CAN’T Do

Most traders focus on their challenges. They obsess about the tools they don’t have, the capital they don't have, or the training that isn't sufficient. Successful traders focus on the actions they can take and the variables they can control. They take full advantage of whatever software, capital, and training they do have. They know that fretting about what they don't have is a waste of time.

Cut Yourself Some Slack and Avoid the Traps

Whether you’re trading stocks, options, Forex, or futures, these principles apply. Mastering trading takes time. But abiding by the psychological principles of success will get you to mastery before you know it. There are more trading computer tips like this in our EZ Trading Computers buyer's guide. Check out our "How To Buy a Trading Computer" e-book. We hope today's Quick Tip helped you. If you found this helpful, you'll want to check out the other computer How-To's I've created on this page. You can always call us if you have questions: 800-387-5250

Frequently Asked Questions

What is the biggest mistake new traders make?

Treating losses as personal failures. After a drawdown, struggling traders go through something close to grief — they personalize the mistake and make it permanent in their minds, and their decision-making never recovers. If you followed your system, a loss is not a failure of yours; abandoning the system because of it is.

Why do traders keep switching strategies?

Because a small loss feels like evidence that the method is broken, and there is always a more appealing one being advertised. It is the fear of missing out applied to strategy. The trouble is that no approach wins every trade, so switching after each loss guarantees you never build enough skill in any one method to get results from it.

Does trading psychology matter more than the platform I use?

By a wide margin. Which brokerage, which software and which instrument you trade have remarkably little to do with who succeeds. What separates traders is whether they follow their own rules, recover from losses without spiraling, and concentrate on what they can control. The hardware matters in one narrow sense — it should never be the reason a good decision does not execute.

How do I stop dwelling on what I don't have?

Notice that it is a category of thought, and redirect it. Struggling traders obsess over the capital they lack, the tools they cannot afford and the training they have not done. Successful ones take full advantage of the software, capital and training already available to them. Worrying about the rest changes nothing and costs attention you need.

Should I aim to "fail big" and learn from it?

No. That advice comes from business coaching and does not translate to trading, where failing big means losing $10,000, $20,000 or more of real money. Learning in this profession comes from small controlled losses inside a system you follow, not from dramatic blowups.