Which Trade Decisions Do You Regret Most?

Though they are simply a part of life, regrets are commonplace; everybody has them, and traders are no exception. In fact, most every trader has at least one infamous trade that "got away," or one or a few trade decisions they wish they could now take back. So, which come to mind for you?

Now some would probably say it was trading the Swiss franc (CHF) in early 2015, or choosing an overseas, discount broker, or perhaps not buying Google or Apple stock very early on when we all had the chance. Any would be understandable, and we don't bring this up just to make you recall painful memories. This is about learning from mistakes and making sure negative, yet preventable outcomes don't happen to you again.

So stop beating yourself up for past trading decisions; take steps today to own those decisions, and more importantly, make it your business to learn from and never repeat those decisions that you may still regret to this day. Here's how…

Which Have Been Your Worst Trade Decisions?

Something unexpected happened in the weeks since we published "What's Your Best Trade Ever?" A bit to my own surprise, many traders I've talked to were honest in saying that they had to think harder to recall their best trades, because it was the disastrous ones and the poor trade decisions that still haunt them even more. What is it about trading mistakes that make you kick yourself forever, almost like that one time you decided to drink too much tequila, or when you agreed to go out with that crazy ex? Maybe it's all the time, energy, and money that you'll never get back again, but for traders, these are some of the more common trade decisions we'll often come to regret the most:

Chasing a "Hot" Market or Set-up

Typically it's the latest "Can't miss" trade opportunity being lauded by the experts and financial pundits, or a "hot tip" you saw on TV or in a chat room, but without heeding your own rules, you simply followed the hype and wound up walking into a proverbial buzz saw in the markets. Because it was ill-advised, and somewhere deep down, you probably knew better, that was a trade and negative outcome that could have—no, should have—been avoided altogether.

Trading Excessive Risk or Size

Maybe you didn't yet understand how to properly limit risk, or broken rules were to blame, but if undue risk or position size hurt you in the past, it's likely a trade decision that you still regret to this day, too.

Talking Yourself Out of a Winning Trade

Some infamous home run trade that took off without you on board is probably your most painful memory of all, and if so, you're not alone. Missed trades haunt traders all the time; even the pros have them. The toughest part? It usually isn't that you didn't see the set-up; it's that you did, but fear and/or emotion got the better of you, and you talked yourself out of taking it at the last moment.

Trying to Make up for a Losing Trade

The emotions that tend to accompany losing trades can cause us to compound poor trade decisions, like chasing a sub-par trade and betting big on it in an effort to recover prior losses or get right back to winning form. And sometimes compounding errors means compounding losses as well. Entire careers have been lost or jeopardized on the back of such decisions, so if you've done it and survived, you should consider yourself lucky, and take the following steps to make sure it never happens again!

How to Learn from—and Never Repeat—Bad Trade Decisions

Clearly, regrets about bad trade decisions don't soon fade, but what if that's a good thing for your trading in the long run? Traders stand to improve, afterall, by learning from their mistakes, and taking conscious steps to prevent recurring errors and bad trade decisions. But rather than living and trading in constant fear of them, here's how to learn your lesson more constructively:

Make the incident—and the lesson—live on

Owning bad trade decisions starts with admitting to yourself that they happened. So make an entry in your trade journal about the decision(s) and the outcome that resulted, and refer to it as needed. Or, put a reminder on your monitor frame or in plain sight on your trading desk so it lives on, but more importantly, can help you remember what not to do when faced with a similar opportunity down the road.

Have a punishment system in place

All decisions have consequences, so whenever looking to eliminate any particular behaviour, having an effective punishment system in place is especially useful. Because trading is a solitary activity, traders have to be accountable mostly to themselves. That's why establishing, for example, that if you break one (or more) of your rules for trading, or repeat a mistake or bad trade decision, you'll have to stop trading for "x" number of days to pay your penance.