Think Like A Trader Blog

Thursday, 1 November 2018

Mistakes Happen to Us All When Trading

Reading Time - 4 Minutes

Into November we march. Where exactly did the year go? Seriously, it seems two minutes ago I was writing my Christmas list to Santa and here we are again.

As we move into a new month, traders will either have made some nice progress in October, or else they will be coming off the back of a difficult one. Perhaps a normal drawdown, but maybe something worse, a scalper’s swing at your trading account from emotional trading and mistakes that has done so much damage that it is difficult to get yourself out of bed and down to the computer in the morning to carry on.

The reason I was thinking about this today is simple – I made a mistake yesterday. I can hear the intake of breath as you read this. A mistake? Professional traders don’t make mistakes!

Well, yes, we do. A lot of ‘traders’ don’t admit to it, because they are offering up an over polished veneer in an attempt to part you with your hard earned so that they can continue to live out the ‘trader lifestyle’ on the back of your hard earned.

We make mistakes. There is no superpowered trader who works flawlessly. And yesterday, I made one. It was one of those where you stare at it afterward and wonder what in the hell you were doing. The trade entry was perfect, exactly what I was looking for. But I aimed for a poor profit target, ignoring a red flag and being rewarded with a nice loss.

But that got me thinking about one of the most important differences between a successful trader and one who is spinning their wheels and making mistakes that lead to serious account damage. And the difference is fairy simple, but plays a huge part in progressing as a trader.

A professional trader is able to take each trade completely on its own merit.

That’s it.

Simple, right?

But what does it mean?

Well, for a lot of people, when they have a mistake like that, they go through the frustration and annoyance, which is normal. But, and it is a big but – they then allow that mistake to influence their future actions, and not in a good way!

Maybe they will force a trade, desperate for a quick fix to the loss. They want to make the money back and ‘reset’ themselves, because that loss wasn’t fair!

Or, perhaps they DO practice patience and wait for a solid setup. But when in that trade, instead of trading it how they should trade it, they decide to hold onto it until it clears the loss from the previous trade. It doesn’t matter that their plan tells them to exit earlier, they will just change the rules this one little time.

Worst case? Those who turn into a wrecking ball after the mistake and set about destroying their account, all that they have worked so hard for, in a desperate attempt to make amends for the simple mistake.

I think a lot of the problem is the aforementioned ‘squeaky clean’ traders who shovel up piles of horse manure and offer it forward to you as their experience of trading. But that is not where all of the blame lies. Unfortunately, a lot of it comes right back to you.

So, you need to understand that mistakes happen, to all of us. It is not possible to do everything perfectly. Look at sport stars who are on hundreds of thousands per week… they make mistakes all the time. You are human and you are flawed, and that is all part of trading.

Your focus must be on reducing the number of mistakes first and foremost. As you progress, they should become less frequent. And then, your next step should be to learn to fully accept them. Mark it down as part of your normal trading losses. You can even have a little section in your trading diary called ‘one of my cock ups.’ Just don’t carry the mistake with you into future trades. That is a recipe for disaster and it is something that happens all too frequently.

It is a new month. Whatever happened last month, put it behind you. Clear your head and get ready for November. Understand that you will, for certain, make a mistake this month and in most cases, it will cost you money. Accept that it is all part of the process. Realise that it happens to us all. Even the ‘Twitter Gurus’ who post success after success after success are only human. It is OK to make mistakes.

I am hoping that you all have a great November, mistakes and all.

James Orr