Did you know that there’s one thing that holds almost every single trader on the planet back from their full potential? Trading mistakes hold every single trader back from their full potential because none of us execute every single trade, every single action perfectly. I’ve been trading for 20 years and I still make these sorts of mistakes.
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The one thing that holds back every trader from their potential trading profits?
None of us is perfect. We’re all human beings, and that’s what holds us back. The problem is no matter how good our method, how great the signal service that we follow, how perfect the indicator is, there’s one thing that will continue to happen if you’re not careful and aware of it. That is making trading mistakes.
Trading mistakes hold every single trader back from their full potential because none of us executes every single trade, every single action perfectly. I’ve been trading for 20 years and still make these sorts of mistakes. It was a fat-finger error. There are things in the market where you’re placing an order, and because your fingers are a little bit fatter than the keys on the keyboard, you end up mashing the wrong number when you’re typing in the volume or the price.
For me, it was a classic because I typed in the volume and hit a zero at the end of the number that I needed. I ended up with a position size that was ten times what it was supposed to be. That’s a huge risk. Luckily, I caught it before anything bad went wrong, and I corrected the error. The thing is, that mistake is so easy to make, and I’ve been doing it for a long time. I placed thousands of trades, and I still made that error.
I want you to look at your trading and think every time you’re about to take any action or not take action in the market. Think to yourself, “what mistake could I be making here? What could be going wrong? What could I do to check to make sure this is exactly the way it should be?” I always ignore the confirmations that popped up on my broker platform about the trade. I didn’t read carefully the confirmation note that came up after I placed the order that tells you the size of the trade, the number of shares, and the commission. If I looked, I would’ve seen that the trade was too big, and I wouldn’t have made that mistake.
If it can happen to me, it can happen to anyone. I’m not perfect. I’m not the best at execution, but I certainly try, and I still make mistakes like this. Here’s why I hold everyone back because maybe not everyone has made a fat-finger error, or not everyone has made big obvious mistakes. Still, every single system, indicator or signal service has maximum theoretical profitability.
If you backtest that set of rules or that indicator or signal, you should see what you would’ve got in the past had you executed perfectly, exactly according to the backtest. But in reality, we don’t get that performance because we get slippage, miss trades, type in their values, or get sick and miss our trading one day. That maximum theoretical performance or profitability of our system, that’s our cap. Our actual performance is usually quite a bit less than that. The difference is always mistakes, and generally, we’re not aware we’re making them.
How can you possibly fix them if you’re making mistakes and you’re not aware that you’re making them? All you do is look at your performance and wonder why you didn’t get the profitability you were expecting to get from my system.
The trick is to look at the performance, the results you got, and then backtest your system or your rules and look at the performance they got theoretically. The difference is made up of all your mistakes.
How do you know what mistakes you made in your trading?
You need a checklist to go through to find all of the common trading mistakes. Then, you can think about yourself and your trading, inspect yourself and decide if you ever had any of those mistakes. I’ve spent a lot of time doing this; I’ve looked at many of my trades, coached hundreds of other traders and seen all the mistakes they made. I’ve put together a trading mistakes cheat sheet to help you do exactly this.
Why is eliminating trading mistakes the best way to improve trading?
Most trading mistakes are quick and easy to correct. Once you’re aware of them, you can put things in place and put measures to eliminate the mistake or the problem. Once you’re aware, it’s much easier to fix. It’s much harder to improve your trading system, find a hot new indicator that makes more money, find some new position sizing method that improves things or diversify into a different market. All those things take a lot more effort, but inspecting what you’re already doing today and identifying if there’s anything that you could do better or any mistakes you’re making in day-to-day trading. That’s easy once you’ve got the checklist to work through.
To improve what you’re already doing, it’s almost a waste of time to go and diversify and find better systems because you’re still going to make the same mistakes.
The bad thing is, trading mistakes compound each other. It compounds against you.
If you’re making many different trading mistakes, they all compound on each other, trade after trade, day after day, week after week, taking you away from your trading dreams, holding you back. If you can systematically eliminate some of those mistakes and do that quickly, as soon as you’re aware of them, then your dreams are that much closer because your trades are now compounding in your favour. They’re not compounding against you. The mistakes are not compounding against you.
Identifying and eliminating trading mistakes is the first massive step towards increasing your trading profitability. The great thing is it can be done fast. You don’t need to read hundreds of books, spend days and days backtesting, or agonize over which markets you need to expand into.
All you need to do is go down to the checklist of the trading mistakes cheat sheet, identify all of the things that you are doing now or you have done in the past, become aware of them, make a note of them and be conscious of it as you’re going about your daily trading. That way, you can eliminate them and improve your results.
Trading mistakes are the one thing that holds every trader on the planet back because none of us is perfect. Still, you can get closer to perfect by identifying and eliminating the biggest trading mistakes that you’re making today.