4 Trading Mistakes Most Traders Make, But You Don’t Have to

Every trader has them; some trading mistakes for which they still can't forgive themselves. And more than just the loss of hard-earned capital, it's believing that they "should have known better" that makes certain missteps haunt a trader's thinking for weeks, months, or even longer. Perhaps you have a trade decision or two that you regret to this day, too?

Whether you're a seasoned trader with plenty of experience under your belt, or a new trader hoping to learn from the experiences of others, what follows are some trading mistakes that are common among traders of all levels, but are also 100% avoidable. So keep these in mind, and if ever you find yourself tempted, maybe you can reflect upon what you've read here and save yourself some physical and emotional capital.

We're all part of a trading community, after all, so let's share some knowledge and experiences that'll keep you from repeating the same trading mistakes that already haunt your colleagues and fellow traders.   

Words about Trading Mistakes and Forgiveness

Quite simply, in trading, just like in life, mistakes happen. In fact, trading is rather unique in that perfection isn't attainable, so for every trade outcome—even the winners—it's easy to find ways that it could have been better. Like if the entry point or stop loss were tighter, or if you used more size, or held the position longer, or perhaps sold it sooner.

"He who cannot forgive breaks the bridge over which he himself must pass."

- George Herbert (Source)

And for losing trades, hindsight will always tell us some reason why we "should've known better" than to take the trade to begin with.

Just by the mere nature of trading, forgiveness is an important quality for traders to have and continually cultivate. So whatever trading mistakes may haunt you currently, or at any point in the future, it's fine to regret them, and even better to learn from them and take specific action to prevent recurrence, but you have to forgive yourself in order to continue along your proper path to becoming a successful trader.

Trading Mistakes That You Can—and Should—Prevent

When asked about their worst trading mistakes, some traders would tell you it was being biased about a particular trade or set-up, while others would say it was not using proper risk controls and sustaining a sizable or unlimited loss. Others still might say it was adding to a losing position, or moving a stop loss to allow a losing trade more room to "turn around." The answers would all be different, but the point remains the same: Every trader could tell you about one or a few trading mistakes they're deeply sorry about making. So as you read about some of the more common trading mistakes below, keep in mind two things:

1) That even successful traders have committed them before, and perhaps even struggle with some degree of temptation to this day; and…

2) That forgiving yourself for these or any other trading mistakes is a critical part of improving despite your (inevitable) negative outcomes in the markets:

Following the Hype

Turn on the TV or listen to the financial news and you're sure to hear about some equity or currency trade that's a near-certain "home run," or a trading system, technical analysis method, or set-up that's the "next big thing." And sure, it's tempting to believe the hype and consider buying in. Plenty of traders ultimately will, but rather than following someone else's hype, set your sights instead on applying your own, properly tested and verified trading method, to achieve your success.

Trading a Non-Qualifying Set-up

Have you ever analysed a trade that satisfied some or most of your qualifications for trading, and wondered if it was "good enough" to take? Maybe you even went ahead and did it? If so, that trade working out would've been the worst possible outcome for your trading in the long term because it suggests that you can be "loose" with respect to your trading rules and still prosper. Even if you've gotten away with it in the past, only trade set-ups that satisfy your every requirement for trading…with no exceptions!

Trading Unfamiliar Markets, Assets, and/or Set-ups

Like you saw in the first couple examples, trading mistakes happen whenever the trader starts "winging it" instead of being disciplined and trading according to the rules and guidelines set forth by their strategy, which will include the specific markets, assets, and chart patterns to be traded. Sometimes, when trading opportunities become scarce, it's easy to try to "cast a wider net," as they say, and look to other markets, assets, and set-ups that are beyond the scope of what you normally trade. But without the working knowledge and experience to understand how these markets, assets, or set-ups function, you'd find yourself at a distinct disadvantage in the event that you decided to trade them out of the blue. Instead, do your research and try demo trading in order to develop skills and experience so you can perhaps utilise them in the future.

Entering Too Early or Too Late

Seeing a potential trade setting up on the charts can be exhilarating, like when an asset is trending towards a key price level like a range boundary, a trend line, or an all-time high or low. Now these are times to pay close attention for sure, but in the absence of a formal entry signal like a pin bar reversal or actual test of the key price level, there's no trade to be had as of yet, so be sure not to jump the gun. Instead, merely add the trade set-up to your currency watch list until the proper signal flashes.

And conversely, there are few trading mistakes that are more maddening than missing a viable set-up when it occurs. That's why traders who are late to spot an opportunity may be all the more likely to "chase the trade," entering late in hopes of catching some of the move that's already in progress. But because entry and risk is more difficult to manage at this juncture, and the move has already started, it represents a lower-probability opportunity and one for which reward/risk may not be in your favour. Missing the trade may have been a mistake, but don't compound the error by trying to get in late. Instead, watch for a retracement or viable second-chance entry opportunity.