7 Trading Mistakes (and How to Fix Each One)

FinancialWisdom
Sep 12
4 min read

Updated: 1 day ago

7 Trading Mistakes

Everyone talks about what you should do to become a profitable trader. However, few discuss the mistakes to avoid. Cutting out the bad is essential. When you eliminate these errors, you will see improvement.

If you can avoid these seven mistakes, you will instantly become a better trader.

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Mistake 1: Calculating Profits Before the Trade Moves

Stop looking at trades based on potential profits.

How many times have you pulled out a calculator when considering a trade? "If this goes up, I'll make ten thousand dollars." This mindset can lead to unrealistic expectations.

When you focus on potential gains, you develop a bias. You start to ignore the possibility of losing money. This often results in traders avoiding their stop loss.

New traders frequently fall into this trap. They think, "I'm probably going to make five thousand dollars," and then cut their risk. They hope the trade will go higher, which undermines their entire strategy.

Mistake 2: Strategy Hopping

Many traders find a strategy that works for a short time. When it stops working, they quickly search for a new one.

Instead of hopping from strategy to strategy, take time to understand why your current strategy isn't working. Did the market change? Are you executing poorly?

Jumping from strategy A to B to C prevents you from developing a real edge. You miss out on building the conviction and confidence needed for success.

Mistake 3: Trying to Catch Exact Tops and Bottoms

Some traders get burned trying to catch the exact bottom or top of a trade.

Our goal is to capture as much of a move as possible. We don't need to take the entire move. If we can secure a piece of it with calculated risk, that's a win.

Traders often walk away with one or two thousand dollars. They might think, "If I had held longer, I could have doubled my profits." However, they need to remember that this was not part of their game plan.

They prepared for a specific move, executed it, and should move on. Avoid the "what if" mindset. Focus on capitalizing on your planned moves consistently over time.

Mistake 4: Taking YOLO Trades and Home Run Swings

How many of you have tried to hit big home runs with YOLO trades?

Attempting to hit home runs increases your risk. If you want to make ten thousand dollars, you must take on more size. If you're not ready for that level of risk, you're setting yourself up for failure.

Traders often increase their size because they feel "confident" about a trade. They might go from risking $200 to risking $2,000, believing the trade will succeed.

When confidence takes over, risk management often goes out the window. This leads to poor decision-making and a lack of adherence to their game plan.

Mistake 5: Setting Profit Goals Instead of Process Goals

Every trader, especially beginners, tends to set profit goals. "I need to make a hundred thousand this year" or "I need to make twenty thousand this month."

Profit goals can be dangerous. The market does not always provide opportunities consistently. Some days you may find many, while others may offer none.

Imagine a trader aiming to make ten thousand this month, but the market is flat. This can lead to forced trades, oversizing, and poor setups.

Instead, focus on process goals. Aim to refine your edge, improve your entries and exits, and gradually increase your size. By concentrating on becoming a better trader, the money will follow naturally.

Mistake 6: Following Alerts Without Understanding

While alert services can be useful, many new traders copy alerts without understanding the rationale behind them.

Firstly, many alert services do not work. Very few provide reliable alerts.

Even when a trader finds a good alert service, they often fail to learn from it. They should be asking, "Why did this person buy here? How can I replicate this?"

If you're using any services, that's fine. However, focus on learning the process. Understand how the trader executes their trades and their thought process. Avoid simply copying alerts in hopes of making money.

Mistake 7: Not Knowing When to Step Away

Recognizing and controlling your emotions is crucial.

Traders often feel emotional after a loss and may want to take a revenge trade. It's essential to train yourself to recognize these emotions and respond appropriately.

When stress or emotional impulses arise, discipline is key. Many traders do not know when to step away, leading to further losses.

They might take a loss, then another, thinking, "I won't end this day in the red." This mindset can lead to digging a deeper hole or blowing up their account.

Traders often trade on tilt, entering and exiting without a clear plan. By the time their account is depleted, they may wonder, "What just happened?"

It takes a moment of realization to understand that a lack of self-control led to their downfall.

These are the mistakes you should eliminate from your trading. Instead of complicating your approach, simplify it. Identify what isn't working and remove those elements.

In both trading and personal life, when chaos arises, it's beneficial to return to basics. Ask yourself, "What should I stop doing?" By following this list, your trading can improve significantly.

Which of these mistakes do you struggle with the most? Let me know in the comments; I read every single one.

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