5 Common Mental Mistakes New Traders Make

Before you open a real live account it is important that you familiarize yourself with the most common mental mistakes new traders make. You’ll probably still make them anyway, but at least you’ll actually be aware you’re making them which hopefully will make easier for you to correct them.

1. Overconfidence

Trading for a living can be a dream come true, but it can also be a nightmare. If you believe trading is easy, you’re done before you even started. Trading is not easy. Trading is hard. Real hard. It’s hard to consistently remain mentally focused and stay disciplined. Know that going in and you increase your chances of success big time.

2. Lack of Emotional Control

Your mind always assumes the worse. It does that to protect you from harm. Because there is a potential that you’ll lose money and all the mental anguish that brings, the mind tells you not to do a trade.

You have to learn how to override this self-protecting mechanism if you want to be a trader. Talk to your mind. Tell it you are fine with doing the trade. Remind it that have a stop placed and you will not be harmed if it doesn’t work out. Convince your mind that in order to make money trading you need to take risks and the risks that you are taking have been carefully planned and measured.

3. Fooling yourself

Once you are in a trade do not try and justify its merit. The market does that for you. The final outcome of your trade should be a stop loss triggered, breakeven, or profit taken Once the trade is completed, don’t dwell on it. Every trade is different and what worked this time may fail next time. Review it briefly and go on to next trade. Focus on the overall trading and don’t spend too much time on each individual trade. This will make you an excellent trader. Accept the outcome of your trades. But don’t accept not sticking to your game plan.

4. Jumping the gun

Traders are constantly jumping into the right position at the wrong time because they’re afraid they are going to miss it, especially at market turning points. Don’t be afraid to miss the first 25% of the move; and get out after 75%. Catching 50% of a confirmed move will produce awesome results. You will also not have to deal with getting stopped out and then watch the price reverse and go in your direction.

5. Not Thinking in Probabilities

Accept your trade losses as being normal. Don’t beat yourself up over them or try to unnecessarily tinker with preset stop loss and take profit. Don’t expect to be right 100% of the time.

  • kirilpc

    True true true I still have these problems.

  • kirilpc

    True true true I still have these problems.

  • renewme

    I love this post. The thing i have trouble with regarding this commonly accepted wisdom are as follows. i myself learned very little in a demo account. also trade with what you can afford to lose offers little incentive for diligence. also ‘cut your losses and let you winners run’ infers moving stops etc. which is kind of the opposite of ‘discipline’. I am not being critical just mentioning some things i have trouble reconciling.

  • renewme

    I love this post. The thing i have trouble with regarding this commonly accepted wisdom are as follows. i myself learned very little in a demo account. also trade with what you can afford to lose offers little incentive for diligence. also ‘cut your losses and let you winners run’ infers moving stops etc. which is kind of the opposite of ‘discipline’. I am not being critical just mentioning some things i have trouble reconciling.

  • Synergistik

    This explains how I lose money. I’m overconfident with a trade, and then I lose. Burned by the loss, I risk less on the next trade. And lo and behold the trade is a winner, with which I could have gain back what I lost and more so had I stuck with my original settings. Eager, I go back then, and lo and behold the next trade loses! Vicious cycle which only results in me losing money. I’m always amazed at how my psychology can ruin the best of trading strategies. The worse thing to happen to my trading is me.

  • Synergistik

    This explains how I lose money. I’m overconfident with a trade, and then I lose. Burned by the loss, I risk less on the next trade. And lo and behold the trade is a winner, with which I could have gain back what I lost and more so had I stuck with my original settings. Eager, I go back then, and lo and behold the next trade loses! Vicious cycle which only results in me losing money. I’m always amazed at how my psychology can ruin the best of trading strategies. The worse thing to happen to my trading is me.