Avoid These Top 5 Trading Mistakes


Simpler Trading Team

5 min read

After years of delivering insights and training, Simpler Trading has identified the Top 5 Trading Mistakes made by traders of all experience levels.

From the very first moment someone decides to take on this lifestyle the obstacles appear.

Estimates show that less than 10 percent of those who take up trading will make it past the first 90 days.

Think about the millions of people who opened new trading accounts this year, most thanks in some part to the pandemic-induced economic crisis. That’s hundreds of thousands of new traders that are already burned out, with accounts emptied by basic mistakes.

That’s a staggering statistic.

So how do you avoid becoming a losing statistic, no matter where you are in your trading journey?

Face the mirror.

Take an honest look at where you’re at and what’s the root of your trading struggles. All traders struggle, but long-term traders who keep more than than lose have learned to take a hard look at themselves.

Here are the Top 5 Trading Mistakes to avoid:

Failure to Plan — Would anyone who owns a business work without a plan? “To make money” isn’t a plan in business, and it doesn’t fly in trading, either. Stop treating trading like a fast night at a casino and start giving it the value it deserves — a potentially highly profitable business venture. Do yourself a favor and write out a plan.

The more you can take decision making out of the equation with money on the line, the more likely you are to succeed.

Quit Work — We get it: most traders want to ditch the 9 to 5 job. But when you focus on that “one big trade” for all the marbles and unlimited freedom of time and money (and no d*** job), you just opened up your world to greed. Greedy expectations slay traders hoping for improbable odds of success.

Quitting the job is a strong aspiration, so keep it posted on your wall. Force yourself to make difficult changes in habits and decision making and develop correct expectations for profitable trading. This sets the tone for emotional and mental determination to work yourself out of a J-O-B.

Exposed — Too much exposure in trading — more trades than you can properly manage that put too much capital at risk — kills trading accounts every day. When you trade “too big” objective decision making goes out the window.

Traders should always have a predetermined maximum position size — the most you’re willing to risk. This should be a set percentage, i.e. no more than 5 percent of your account at risk at any time (this includes ALL working trades). Following this rule increases potential for success.

Chasing — Starting out, most people feel like if they don’t have “skin in the game” they’re missing out. That couldn’t be further from the truth. Chasing means you’re not focusing on the best trade setups.

Keep in mind: 

  • Cash is a position (should be part of your trading plan)
  • You will never catch every move
  • Markets will open the next trading day… and the next day and the next

Realize that the markets have been around longer than all of us, and will continue after we’re gone. So why spend time trading bad setups?

Being Right — At this very moment, before you make another trading decision, you need to ask yourself, “Am I in this to be RIGHT or am I in this to make MONEY?”

If you answered “to be RIGHT,” trading is not your future.

In trading, you will be wrong. Trade setups will go against you. You can’t hang on to a trade just so you can eventually, maybe, hopefully, be “RIGHT.” If a trade is going wrong, you must learn to: “CUT LOSERS, CUT LOSERS, CUT LOSERS.”

Ingrain this into your decision-making, then do it!

The markets are masters of exploiting weaknesses, and if you don’t check your ego at the door, the markets will make you pay. So the next time (or first time) you have a position going against you, just realize re-entry is just a click away and it’s totally OK to be wrong.

Conquering these Top 5 Trading Mistakes is a winning plan for traders.

Identify your trading concerns, and realize these issues aren’t difficult to correct. But they do take determination to get started. Improve your trading habits and develop the mindset of a profitable trader.

We Saw: Dow soars to highest level since March 6 — 

  • Markets open short week with a bang
  • Uptick pushes markets toward second positive month
  • Dow knocking on door of 25,000 threshold

We’re Watching: … Unusual start with mixed messages —

  • Previous high-flying stocks sagging
  • Previous laggard stocks rallying
  • Shaky expectation of another strong day tomorrow

Learn more about navigating news and the markets — check out the Simpler Trading community HERE.