If you missed part 1 you can read it Here.
No Trading Plan
“Make money” does not constitute an intelligent trading plan. A trading plan is a map that clearly outlines how you are going to be successful. It spells out what your edge is and should be understandable to someone who has no knowledge of trading. If you don’t have an edge, you don’t have a plan, and likely you’ll wind up a part of the statistic pool (part of the 95% or more of new traders that lose money and quit).
Your plan should also include things like how you will track your results and how you will go about adjusting your results. And don't forget proper risk management of course.
Trading too Short-Term
If you’re profit target on a particular trade is less than 15-20 pips then you might want to consider finding another trade with higher profit potential. The spread or commissions you pay to enter the trade eats away at these tiny profits.
Also, consider your stop loss distance. It doesn’t make much sense to take a 15 pip profit while using a stop loss of 150 pips. It would make even less sense if you weren’t using a stop loss at all. You would need to have a 10:1 win ratio just to pay for the losses which is nonsense. The best traders I know win somewhere between 40-60% of the time not 90+%.
Lack of Conviction
This is a massive one!
Conviction only comes from successfully trading over a sustained period of time. If you lose money early in your trading career it’s very difficult to gain true conviction because you will likely not stick with your trading system for very long. This can lead to a cycle of switching trading methodologies before you ever have a chance to gain any real momentum.
Learn the business of trading before you trade so that you give yourself a professional head start. You would not try to open up a restaurant without some very good and detailed plan would you? Trading is no different than any other type of business and should be treated with the same level of professionalism. Study hard, get a qualified mentor, make a trading plan and PRACTICE PRACTICE PRACTICE.
If you want to know more on how I view conviction you can view my article on How to Build Conviction in your Trading.
Part 3 to follow shortly!
