Cutting Out Bad Habits
So everyone talks about what you should be doing to become a profitable trader, but no one really talks about the things you should avoid. So, I'm a big fan of cutting out the nonsense, cutting out the bad habits, bad traits, and bad things that you have in any skillset that you're trying to master.
And the moment you cut out the bad, you automatically start improving. So in this article, what I want to talk about is I want to talk about the things that you should stop doing today right now, if you want to become a profitable trader.
Avoiding Preconceived Notions
Let's start off with the first one. So, avoid looking at a trade on what you will potentially make. How many of you guys have looked at a trade before and, before you even got in, before the trade has even moved in your favor, you start automatically taking your calculator out and you start looking at what will I make.
If this trade goes up, I'll make $10,000. If this trade goes up, I'll make $5,000. You start going into the zone of what will happen and what you will make and so on. And you start looking at all the good parts of the trade.
Now, this habit is really, really bad. This trade is just something that you have to get rid of. The reason you have to get rid of this is the moment you start looking at the positives of a trade, you start getting a bias, right?
You start only looking for things that confirm that bias. You won't look at the bad part about the trade. You won't even believe that you can lose money on this trade. In return, what traders start doing is they start avoiding their stop loss.
They start avoiding what they will potentially lose or if they will lose. And that just kind of puts you in a very difficult situation. I have been in those situations in my early days of, you know, when I was trading, where I would look at a trade and I'll say, I'm probably going to make $5,000 and whatever my risk is, I would cut my risk out and I would just take that trade hoping that it would go higher and higher or hoping that I would make a lot of money from it and that would just ultimately destroy my whole game plan.
Steer Clear of Strategy Hopping
Next one, strategy hopping. Now, I see so many traders, they find an edge, they find a strategy that works for a week, works for two weeks. And the moment that strategy doesn't work, they go on and look for the next strategy. Now, I do agree as a trader, we have to have multiple strategies. We have to have strategies that fit and work under certain marketing conditions and we know how to respond to.
But if you do have a strategy and it stops working, your first job should be to understand why is the strategy not working? Am I doing something wrong? Did the market shift directions? Or is the market not catering to this particular strategy?
But most traders, they don't look at that. They just go, well, hey, I'm not making money doing this. I'm gonna go and look for something new. I'm gonna look for a new indicator. I'm gonna look for a new structure, new, whatever it is.
And I'm gonna use that new thing to now make money. And what ultimately happens is you hop from strategy A, B, C, D and you never allow yourself to fully develop an edge like you should as a trader.
Not Chasing Tops and Bottoms
Next, trying to catch tops and bottoms. I know so many traders that get burned from the market because they do one thing where they try to catch the exact bottom or the exact top of a trade. And I always tell traders, our job is to take as much as we can from a move.
We don't have to take the whole move as long as we can get a piece of it and improve to get a bigger and bigger piece that has a calculated risk and edge behind it. That's what we should take home. Now, there's so many times that I have been in trades where I will walk away making $10,000, maybe $20,000.
And if I held the trade for another 30 minutes, another 40 minutes or whatever the case is, I could have doubled or tripled my profits. Now, when I look back at it, yes, I get very upset. I get very kind of frustrated mentally.
But I have to remind myself that that wasn't part of my game plan. That wasn't something I was looking to capitalize on. That wasn't something I was even reading in the market. I didn't even have any sort of probability aspect or edge over it.
So I had no idea that move was going to happen. This is the move I prepared for, this is the move I planned for, and this is the move I executed for. I got that move and I need to move on. Right? So next time you guys are in any trade, don't say, "well, oh, I wish I got in earlier or I wish I held my trade longer."
No, our job is to capitalize on a move, a piece of that move and be able to do it over and over again over a long period of time.
Avoiding High-Risk Home Run Trades
The big home run trades or the YOLO trades. How many of you guys have tried to hit big home runs or how many of you guys have just taken YOLO trades trying to make a lot of money?
Now, I understand our job as traders is to make money, but our job is not to take stupid trades and go out of control and put on an extreme amount of risk. Now, the moment we try to hit home run trades, we are immediately entering a territory of putting on more risk. Right? So, for example, if you want to make $10,000, you're not going to be risking a dollar or $10 or even $100 to make that.
Now, if you are in some instances, the probability of that happening is extremely low. But in real instances, if you're looking to make $10,000, you're going to be putting on size. If you're looking to make $20,000, you're going to be putting on size. So the moment you mentally get to a range of, "I want to hit a home run," and especially if you're not at that place of being able to take the risk, being able to take those type of trades, you just put yourself at a big disadvantage.
And I see so many traders getting into a trade where one thing they alter is their size. They go into the trade and say, you know what? I'm gonna go in with a thousand shares or a thousand contracts, or instead of risking $200, I'm gonna risk $2,000 because I think or I'm confident this trade will go higher.
We do that because we have this assumption that this trade will only go higher and we will be right. And the moment we start calculating that, and the moment we start thinking we're gonna be right and how much we can potentially make, it just tips everything else off from us.
And as I mentioned, our risk management goes out the window, our edge goes out the window, our game plan goes out the window. And it's just something that you don't want to be involved in. So next time you're getting into a trade and I realize we want to make money, just say this is what I'm willing to risk, this is my downside, if I'm wrong, This is the downside I want to take if I want to make more I have to put more downside Which is not the smart thing to do.
Rethinking Profit Goals
Profit goals, profit goals, profit goals. So this is something every trader does, especially me. I used to do this in my early days all the time. I used to set profit goals my first year of trading. I need to make a hundred thousand dollars this month, I need to make two hundred thousand dollars this quarter, I need to make X amount. Now, having profit goals is okay in the majority of things, but in trading, it's kind of difficult.
Now, let me explain, in trading, having profit goals is difficult because the market doesn't always present opportunities. The market will give you opportunities some days, some weeks, and other days or weeks, it will not give you opportunities. Opportunities are not consistent. So imagine you set out a goal to make ten thousand dollars this month, but this month the market is dead. It's flat. There's not a lot of opportunity.
Now, mentally, you get wired to put on trades, put on size to hit your goal, and that leads to taking on bad trades. That leads to over trading, over sizing, and so on, which puts you at a disadvantage.
So one thing I recommend is do not have profit goals; instead, have goals such as: I want to refine my edge, I want to get better at entries, I want to get better at exits, I want to slowly increase my size, I want to add another strategy to my playbooks. Make that your focus of goals; these are what I am focused on, these are my goals. Not money-related goals in trading just end up coming to hurt us.
Learning from Alerts and Communities
And lastly, something that may seem counter-intuitive but requires understanding how to navigate: following alerts on platforms like Discord, Telegram, and so on. Now, I don't have a problem with alert services or these communication platforms; by all means, they can be useful. However, the problem arises when new traders come on board and blindly copy alerts without comprehending the rationale behind the moves, the associated risks, or the learning opportunities.
Firstly, most of the time, blindly following alerts doesn't work. There are very few people whose alert services are actually consistently successful. Secondly, even when you are part of a good alert service, you won't learn much unless you actively seek to understand the process. Ask yourself why a person bought or sold at a particular point. How can you replicate their approach? So, what I'm emphasizing is that if you are using such services, look to learn the process behind the alerts. Understand how they execute trades and the thought process driving their decisions.
Don't go into any alert service thinking you can simply copy and hope to make money, as that's not the reality of it. I'm sorry to tell you that. These are some of the things that I believe you should avoid in your trading.
As I mentioned earlier, when things aren't working, instead of complicating matters and adding more elements, consider simplifying and removing the things that aren't working. This approach applies not only to trading but also to your personal life. When things become chaotic, returning to the basics and fundamentals can often lead to significant improvements. I personally do the same in my life; I identify and eliminate things that are not serving me.
When I enter a trading slump, I make a list of things I need to stop doing, and by following that list and removing unnecessary elements, my trading improves without adding new strategies or techniques. So, with that being said, I hope you found value in this article. Thank you so much for reading, and I look forward to sharing more insights with you in the next article.