Stop Struggling at Trading!

Often, it is difficult to pinpoint the reason for your trading failure. But, there are some very common issues that are often associated with trading failure. Here are some tips on how to avoid them.

1. Stop Over trading

Having good working capital is a vital part of growing a business. Without it, you can run into trouble. Having a clear picture of your cash reserves can help you spot potential shortfalls and survive cold streaks.

Overtrading is the most expensive mistake you can make as a trader. If you’re not careful, you can find yourself blowing your account, cutting corners, or even having your business go under. To avoid this situation, make sure you take the time to plan your trading week.

The first step is to decide how many trades you’re going to do each week. Not I see each week versus day.  Many successful traders will set a limit of two or three trades each week, while at THT we look for up to 2 to 3 per day but be ok with 0. This helps you keep your ego in check while still improving your performance.

The most important thing to remember is to keep your emotions in check. Traders who let their emotions get the better of them are more likely to overtrade. This can lead to more trades than you’re able to handle, which can ultimately lead to a blowout account.

2. Be Patient For Setups / Cut Losses Quickly

Whether you’re a newbie or a seasoned trader, impatience is often the reason you fail at trading. However, there are some situations where patient trading pays off.

For example, when you’re trading options, you may be impatient with set-ups. However, you shouldn’t stay patient in a losing trade. You’ll want to take the time to refine your set-ups or to scrap them all together. Ultimately, patient investing is like fishing: You need to catch a fish that bites. If you don’t catch it, it may be gone.

In addition, you may be taking too much risk with your trading. If you enter a trade when the risk:reward ratio no longer favors you, you may be headed for ruin. This can be especially true if you’re using a too-large trading margin or leverage.

3.  Have a Risk/Reward Management Process

Having a great trading system can be a powerful tool, but if you aren’t managing risk correctly, you won’t succeed at trading. If you’re taking a risk with your money, you need to be able to track it and the consistency of rewards versus that risk.

Are you measuring: draw down before profit, win/loss rates, categorizing trades by setups, peak reward, frequency at what amount of reward, performance by day of week and time of entry, and time in trade?

Once you know those metrics, you have a guide for how things have played out in the past.  If you know 50% of the time you are right, but when you are right you typically get a 5x reward to the risk, then you can be patient for the gains and cut losses at your stops and no worry about it because over 10 trades you will be highly profitable.