Trading today is more popular than ever. Countless individuals flock each year to the markets, hoping to make large amounts of money, many attracted by misleading commercials promising simplicity and easy access to riches.
Many of these aspiring traders fail.
In as much as we would like to think that each individual commits different and very particular mistakes in his quest for success, my experience as both a trader and mentor has shown me that most traders typically fall prey to the same problems and mistakes.
The following are just but some of the typical ones:
1) Lack of a Trading Plan. Most traders lack a well conceived plan to trade the markets, and most mistakes committed by them can be summed up in this category. The lack of a decent plan means that the trader won’t know which “events” to focus on, the rules to trade those events, money management rules, etc. Typical mistakes such as not taking losses and overtrading can be attributed to this problem.
2) Lack of Confidence in his Tactics. Traders will only execute effectively if they’re confident about the probability of any particular tactic. Learning it in the members area isn’t enough. You have to test it yourself, and reach a level of comfort and confidence that will allow you to execute with 100% precision.
3) Trading Under Monetary Pressures. Since people think that this is an easy road to riches, many leave their jobs or expect to make an immediate living trading the markets. Nothing is more detrimental to your success as a trader than facing the pressure to perform. Now, traders are focused on money, instead of processes and this leads to “dollar counting” which is detrimental to a traders progress.
4) Trading with Insufficient Capital. Undercapitalized traders face two typical problems. One is the fact that they’ll tend to take positions that will utilize a big percentage of their accounts, which in turn might produce losses that will be more significant than they should be. This is another reason why traders don’t take losses.
5) Lack of Proper Technology or Too Much Reliance on Only Technology. Traders that lack the proper technology, either because of the fear of using systems or lack of commitment to obtaining them as a necessary cost of doing business, face a debilitating disadvantage as they can’t process information quickly enough, and as we all know, this is a business that deals with the rapid analysis of information. On the other hand, there are those that think that technology alone, without the proper training and method, can solve their problems. An aspiring trader with no method, who just relies only on technology, is operating at a huge disadvantage.