There are so many mistakes to make and repeat that this will be an evolving section of the website as I remember I am reminded of the multitude that I’ve made.
Aside from making you feel better about your own mistakes there is a second point to each of the mistakes which is, how I either corrected the mistake or dealt with the underlying issue causing me to repeat a previous mistake.
- traded after closing a losing position – something dramatic may have changed to alter my view and after closing out my initial position for a loss I then try to take advantage of the momentum switching around to make back some money.
- trading in anything after a loss – related to the above mistake of reversing my position in an instrument I just had a loss in, is then looking for another available opportunity. Over time through my journaling I’ve realised I’m trying to make the money back because I feel really bad about the losses. In some ways dirty, stupid, dumb, annoyed, pissed off that it doesn’t reflect my true ability and that no one will know how difficult it was to get there, what a small mistake cost me so much money, how reasonable it was that I made the initial bet, all these things which are not reflected in the result. The loss of money. Truly a harsh and vindictive judge. But at the same time there’s not really any personal anger. Maybe just some sort of diffused anger towards all the people for collectively voting the other way. Part of it I guess is a don’t they know this can’t continue? Or can’t they see the trend / pattern is higher? or how much longer can they wait? Perhaps that is another point to recognise – sometimes I’m only hearing or listening to one of the voices of all the many voices of people who would take the other side of my trade. And I don’t know who is voting with how much, is the crazy voice voting with 1 lot or 100,000 lots. I don’t know, I don’t know and I will never know. I can only control what I can do and minimise playing in the games that hurt me, when I get embarrassed when I get hurt, when I exposed. Perhaps the best analogy I can make is when there is a bully waiting on a certain street or at a certain place. You can only stand up to a bully with a smarter way to play or more firepower. It’s unlikely in trading you will have more firepower – you’ll almost always be the ‘smaller guy’. So you have to either choose your battleground (what product or time zone you trade) or change your strategy (how you trade).
- trading too big for my comfort level – this is when the losses start to matter, i start to think about reasons things could turn around.
- trading without an explicit pre-trade plan – this is probably my most frequent mistake and whilst not completely true that I’m trading without any plan, I don’t often take the time to write it down when I have the idea, instead I mention it in my trading journal and probably have discussed levels but I’m not at the stage where I’m doing this explicitly and automatically for every trade. This is one of my biggest areas to improve.
- Making a rule about a loss and then not following it – this is probably my most expensive mistake and an argument for me using a mechanical trading strategy. I tried to implement a mechanical trading strategy however I realised I could not yet describe all the scenarios and rules which I would act on. To remedy part of this I have started recording in more detail the characteristics of a trade set up to see what common elements I could systematise. Also it means I can set up alerts to monitor more markets.
- Trading as if I needed to trade some specific way e.g. trade the way I will do in the future, ignoring my current context. The best example of this is beating myself up over not following a trend till the end of the trend even though I still had a good return.
- Ignoring what the results are telling me.
- Ignoring common advice (trade small when you start) when I was not getting good results.