Trading is as much an art as it is science. Having a finance background and knowledge of the market is as much important as having the right mindset and behaviour. As anyone who has ever tried their hand at any form of trading, whether its stocks, metals or currencies, they will tell you how much of a mental mind-game it is. You need to have a level head and be able to take in large amounts of information in a short amount of time. Understanding your weaknesses can help you watch out for those minefields that can result in significant trading losses in a short time. Below we describe four of those weaknesses.
- Distractions
- Overconfidence
- Loss of confidence
- Lack of Patience
It’s very easy to sit at your desk and trade with youtube, facebook, skype or even the TV on in the background. You may convince yourself that you are focused, but the reality is these things can distract you and with markets changing in split seconds, those distractions could be the difference between a successful day trading and one that haunts you forever. When a professional trader is trading he is 100% focused and does nothing else besides watching his charts. He might have a website open to monitor news releases or watch the news ticker on a TV channel (on mute!), but that’s it. The pro knows how important it is to be 100% focused and when there is nothing to do and no trading setup in sight, he turns off his platform, works on his trading skills or just takes the day off.
A common mistake is thinking you’ve mastered trading after a small winning streak. You start upping your trades without doing the proper research needed and suddenly it comes crashing down. The problem is that after a few winning trades, amateur traders use too much risk and take trades that are too big or violate their trading rules because they ‘can feel’ what will happen next. It’s not uncommon that after 4 or 5 winning trades, traders lose all their profits on only one trade. Are you guilty of that too? A winning streak is normal and will happen time after time; it is just how trading works. A professional trader ALWAYS sticks to his plan, always follows his risk and money management rules and NEVER lets one losing trade wipe out a significant amount of his capital.
Losing streaks are not a fun experience however the good traders know this is part of the industry and bounce back. A lack of confidence can have a detrimental effect on your future trading and impact future trading which isn’t a good thing. Being aware of the risks but sticking to your plan is important. Use tools and resources to help you came your comeback. Following the news with precision will help you gain that advantage that you need.
If it’s a get-rich scheme you want trading is not for you. It takes a long time before you can make good money and this should be acknowledged before you start trading. There will be stress and anxiety so you need to make sure you can handle these types of pressures otherwise you may never reach your end goal.
