The 44 Most Common Mistakes That Destroy Traders

[Igor Pereira]

The 44 Most Common Mistakes That Destroy Traders

Technical Guide to Professional Self-diagnosis

By Igor Pereira
Financial Market Analyst
Founder of ExpertFX School

Awareness is the first step towards evolution in the financial market.

Making mistakes is part of the process. Repeat them, however, creates mental and operational patterns that destroy accounts and careers.

Exclusive analysis for ExpertFX School — Igor Pereira:
“The market does not break traders. It is the repeated wrong habits that do this.”

This material is not motivational. It's technical, direct and necessary.

GENERAL NEGOTIATION ERRORS
1. Change your trading strategy after 5 consecutive missed negotiations
Losing is inevitable and even the best traders will notice losses regularly. Changing his approach after some missed negotiations puts him back in the learning curve. Stick to your approach, every sequence of defeat will end.

2. Do Not Expect the Unexpected
A sudden collapse of the market, an unexpected press release or the loss of your Internet connection can happen at any time. Be prepared with a fixed stop loss in effect. If a single negotiation could destroy your trading account, you didn't do your homework as a trader.

3. Do not follow relevant press releases – deny the importance of news
Even if you are a purely technical trader, you do not have to negotiate the news, but you must be aware of it at any time.

4. Not ready
You just turn on your computer, start your trading software and dive into the graphics? Just as an airplane pilot does not just ask his copilot after takeoff to where he is going, a trader needs to have a detailed trading plan for the next trading session.

5. Do not do a post-trade analysis
What you do after the negotiation session ends determines your future success as a trader. Professional traders analyze their negotiations, analyze the data and plan the next day.

6. Do not use a trading log
One of the safest signs that you have no future as a trader is when you don't have a trading diary and claim you don't need one.

7. Do not fully learn a method
The consistent loser retailer jumps from one method to another, hoping to stumble on the Holy Grail. You have to accept that there is no higher trading method and that it all comes down to your skills to make a negotiation strategy work.

8. Unable to adapt to market changes
After finding a way to make money consistently negotiating, the job is not finished. Financial markets are constantly changing and evolving bodies. If you cannot adapt to changes in market conditions, you will soon leave the market.

9. Let retrospective influence your negotiation
Amateur traders watch a negotiation after they leave and get hurt if they get in too early. Other times, they try to find reasons why a negotiation was a loser to change their entire commercial approach on site. The professional trader collects data and makes informed commercial decisions based on a large enough sample.

10. Do not understand the difference between long- and short-term perspective
In the short term, anything can happen. You cannot control the outcome of your negotiations and certainly cannot predict the outcome of your next two, three or even ten negotiations. But in the long run, it doesn't even matter. If you have a negotiating strategy with positive expectations and follow it religiously, the only possible result is to earn money.

WHAT THE TRADERS SAY
11. A smaller stop loss means less risk
The distance from your stop loss is unrelated to the potential risk of your negotiation. The risk is measured in a potential loss of your trading account. You should set the stopping distance relative to profit distance and trading size to get an idea of the potential risk.

12. You measure pipe performance
One clear sign that traders don't know what they're talking about is when they start comparing profits in terms of pips. Pip measurements are completely random and have no value for expressing performance. Pips are relative!

13. Claim that the victory rate and the risk ratio:reward are useless
Although the winning rate or risk ratio:reward alone have no value, together are all a trader needs to determine their future commercial performance. The combination of risk ratio: reward and victory rate is one of the most powerful concepts in negotiation.

14. Make claims like: “Win up to $2,000 a day in daytrading”
Talking about absolute numbers in negotiations is an easy sign that someone is trying to fool you. A possible return can only be declared in percentages. However, not to mention the risk involved, declaring potential profits is useless and dangerous.

15. Blame HFT and algorithm trading for your inability to make money
HFT and algorithms are not the reason you can't make money. High-frequency trading and trading algorithms are nothing more than new technologies that change the way the game is played. Traders feared that telephone, computers and the Internet would destroy commercial opportunities. Go back to number 8 and read again.

16. Believe in price forecasts
“If anyone knew that the price will rise to $40 tomorrow, it would rise to $40 today.” It is impossible to predict where the price will go in the future. Due to the number of traders, economists or so-called trading gurus and the amount of predictions, you will always find a handful of people who have been right. Don't blindly follow someone who was very lucky.

17. You use the words casino, boring, fireworks, crushing to describe your trading day.
Markets go up and down, sometimes they move fast and sometimes a little slower, but it's the nature of how financial markets behave. However, if you are negotiating because of emotion and enthusiasm, it will not last long in this business. Adopt a professional mindset and use appropriate language to avoid emotional negotiations.

18. You use absolute words like never and always to talk about what will happen
Using absolute terms in negotiation is a very dangerous thing to do, always! If you have noticed that a certain configuration has worked 100% in the last 20 times, it can easily fail next time. And just because you've never seen prices go strongly against you, it's still not an excuse not to use a stop loss order or take a bigger position.

19. Use the words “hope”, “desire” or “feeling” when talking about a negotiation
If you hear yourself saying or thinking that you expect or want the price to be behaving in a certain way, leave your negotiation immediately and do not negotiate anymore. Traders must rely on concrete facts and negotiate on the basis of actual statistics of proven methods. Emotion-based trading is one of the main reasons retail traders consistently fail.

RISK AND MONEY MANAGEMENT
20. You watch your floating P&L
While in a negotiation, do not watch your account go up and down to each tick. This will result in emotional commercial decisions.

21. Think about what you can do with the current profit or what you could have done with the loss you could assume.
Just risk what you can lose comfortably. Negotiating very large results in commercial decisions based on fear and greed, the two biggest enemies of traders. On the other hand, trading too small makes you sloppy and more likely to abandon trading rules and risk management.

22. Do not pay attention to correlations and how they increase their risk
Financial markets are highly correlated. Traders often believe that by conducting several negotiations on different instruments they are diversifying and reducing their risk. What these traders don't realize is that, especially if your trading instruments are in any way related, they often move in sync and instead of diminishing your risk, you are actually increasing it.

23. Using a fixed stop loss with the same pip value in different instruments
Traders who use a fixed stop loss with the same pip value in different instruments and/or different deadlines did not understand the rules of the game. There are no shortcuts to commercial success and developing a sophisticated and tested stop loss strategy is as important as knowing when to enter into a negotiation.

24. Underestimate the importance of drawdowns and their statistical probability
Most traders believe that if a trading strategy has 5, 6 or 7 consecutive losers, it cannot be a good negotiation strategy. What if we said a negotiating strategy was still valid after 10 consecutive missed negotiations?

25. Increasing losing positions
This is a major impediment! Learn to accept losses because they're normal. Trying to delay the loss is the death sentence for your trading account.

26. Risk an arbitrary number of 2% in each negotiation
The settings vary in quality and the size of your position should take into account this. Learn to distinguish between different configuration and input qualities and use a professional position sizing approach.

27. Ignore the importance of spread
The investigation found that only about 1% of all day traders can profit in a predictable way, without fees. Spread is the cost of doing business as a trader and therefore finding ways to minimize your costs should be at the top of your priority list.

28. Keep the losers while selling the winners
The research discovered the so-called disposition effect, which states that, on average, traders sell winning negotiations 50% faster than keep loser traders.

29. Negotiate on an account that is not the right size for you
Whether your trading account is too large or too small, both scenarios are not ideal and have negative effects on the performance of the negotiation because they are the cause of emotional negotiation decisions.

30. Deny the importance of mathematics and statistics in negotiation
Mathematics and statistics are boring and difficult, but no matter whether you like it or not, as a trader you have to understand the basic concepts of mathematics. In the end, negotiating is nothing more than juggling probabilities, calculating probabilities and trying to move them to their advantage.

TRADE MANAGEMENT
31. Do not have a trading checklist
Especially for beginner traders, having a checklist before entering a trading can significantly increase their performance. A checklist can keep you out of negotiations that do not meet your criteria and increase your discipline easily.

32. Zoom in your stop loss order when you see the price going against you
This is another impediment. Your stop loss is where you accept your commercial idea is wrong. Expanding stop loss orders signals that your emotional responses have taken over and that you can no longer make the right business decisions.

33. Using mental arrests because you think it gives you more flexibility.
A mental stoploss brings no advantage. None!

34. Pull your stop loss order to the balance point
Unless it's part of your trading strategy and you can statistically verify that moving a stop loss to the balance point is the ideal approach, don't do it. Moving a stop loss to the balance point is a sign that you are afraid to suffer losses and return the profits.

35. Getting too close to your stops
The price moves in waves and you need to give room for your negotiations to “breathe”. Moving a stop loss very close to the current price will often get you out of negotiations that would have gone to your profit order. Learn to distinguish between small retractions and reversals.

36. Using the large round numbers or the famous moving averages for placing your stop loss
The research showed that the price behaves significantly differently in round numbers and that the frequency of reversal is also higher in these locations. Professional players are aware of the fact that retailers are lazy traders and choose only what is obvious and easy and it is even easier to use that knowledge for their own benefit.

COMMON FEELING
37. Waiting to get rich soon
The commercial industry has created the illusion that, with enough leverage, the right business strategy and a little luck, you can make a lot of money easily. However, even after years of losing money month after month, the “traders” still believe that the only reason they have not become millionaires is because they have not yet found the right strategy. Wake up!

38. Do not treat negotiation as a business
Negotiation is not necessarily difficult or difficult, but the average trader's approach makes it impossible to make profit from negotiation. Testing different ideas, calculating and analyzing data, adjusting, continuous self-improvement, preparation, diary registration and discipline are all things that the regular trader does not want to hear about and that is exactly why more than 99% of all traders will never make money. .

39. Buying a cheap EA $10
At some point, the traders will give up negotiating and start looking for trading robots or EAs "cheaps" to make them rich. They then buy a trading robot of just $10 on a random site or an unknown guy on some trading forum, without even understanding what the robot does and start trading their own money. If you still don't know why this is a bad idea, you need to find out for yourself.

40. Believe that price cannot go up/down
Even when the price has been going on for several months, you will always find traders who, week after week, tell you that the turn is imminent and are looking for short entries. Traders would do well to focus on what is obvious and adhere to the trend as long as possible.

41. Negotiating your own money and savings after 3 months of demonstration negotiation
Even the people who attended college or university and who spent years preparing for a job and then progressed are among the traders who open a demo account, lead some random negotiations and, after 3 months of mixed results, start negotiating their own economies. The possibilities offered by the negotiation are unlimited and may blind people, but the traps are equally large and the next margin call is just one click away.

42. Curse indicators while praising candlesticks
Whether you're trading in price shares or following indicators-based trading strategies, it doesn't make a difference in your chances of success as a trader. Although people tell you otherwise, the strategy you choose will have no impact on your commercial success. It all comes down to how you apply the strategy, adjust the parameters, and manage yourself as a trader.

43. Analyzing your performance daily
Don't try to be profitable every day, week or month. Negotiation is a long-term activity and you have no influence on the outcome of your negotiations. Your only responsibility as a trader is to find a method that has a positive expectation, apply it religiously and constantly monitor every small aspect of your performance. Don't try to force winning negotiations, markets will show you who's boss.

44. Follow advice from random people
Never make negotiations based on opinions, tweets or promises made by others. “Give a man a fish and you will feed him for a day; show him how to fish and you will feed him for the rest of your life.”