A few weeks ago I wrote to you about some of the biggest lessons I’ve learned in my time as a trader. This week, I’m going to continue that conversation by sharing with you some of the biggest mistakes I’ve made (and the lessons that you can take away from them).
My hope is that you won’t do the same!
Mistake One…
Learn that trading needs to fit your lifestyle, not the other way around.
As an enthusiastic person by nature, when I first started trading I wanted to dive in headfirst. I’d find promising tickers or a five-star setup and snap it up. So, what’s wrong with buying a perfect setup? Well, at the time Leo was an infant, and I didn’t have time to sit in front of the computer all day. I’d find great entries, but then sometimes be too busy to catch the perfect exit. My mistake was not balancing my trading with the other aspects of my life, but luckily it’s easily corrected!
Everyone’s different. Your schedule, your requirements, and your time are unique to you. So in order to not make the same mistake, you have to find a trading style that works for YOU. For instance, your friend may be a great day trader because they can allocate more hours in the day to watch the market, but perhaps you love long term trades because it gives you the flexibility to step away when it’s necessary. And don’t forget to always reassess your lifestyle and how trading fits into it. Your life is constantly changing and your strategies should be changing along with it. Gone are the infant Leo days and I’ve adjusted accordingly!
Mistake Two: Learn that you’ll have losses and that’s okay.
One of the lessons I wrote about in a previous newsletter was about not focusing on chasing money because it leads to people making mistakes. Another mistake people make is just the opposite — it’s when they stop trading out of fear of loss. Understanding that you’ll lose money in the market is a reality every trader must face. No one can have a 100% success rate. But don’t let this thought paralyze you into missing big opportunities. In the beginning, there were times where I saw a momentum move on the rise and I sat out because I didn’t want to lose money. Don’t do this! Instead, find a risk to reward ratio that you’re comfortable with and go with your gut. Otherwise, you’ll be left on the sidelines while everyone else gets a slice of the action.
Mistake Three: Learn not to get too emotional.
Trading is emotional by nature. Steaks are always high when you have money on the line. So when things aren’t going the way you expect, you can begin to act recklessly.
I’ve written to you before about recognizing your Trade Monster and how to tame it — this is the concept that I’m talking about here in Lesson Three.
It’s when your Trade Monster comes out, that you need to recognize it and stop it before it rears its ugly head. Your Trade Monster can come out when you’re trading both to the upside and downside. If you make a great win, you have to come off your high before you trade again. Otherwise, you could be a victim to euphoric trading. If you take a big loss, you have to let it go before you trade again. Otherwise, you could be putting too much risk on a trade in an attempt to earn your loss back. What’s helped me is to write my rules down and reference them with every trade I take. This way logic (not emotion) is leading my trading.
What are some trading lessons you’ve learned?
