After trading for almost 2 decades and working with 1000’s of students, I’ve seen trading mistakes of every variety. There is only one person who is responsible for all of your trading results: The person in the mirror.
In Trading in the Zone, Mark Douglas talks about how 95% of your trading mistakes are the result of your existing beliefs about 4 simple concepts:
- Beliefs About Being Wrong
- Beliefs About Losing Money
- Beliefs About Missing Out
- Beliefs About Leaving Money on the Table
We have talked a lot about finding consistency in trading in articles earlier this week. Understanding these 4 common reasons will drastically improve your trading consistency, and help you understand and limit the trading mistakes you keep making. We will talk about winning and losing belief systems of each concept so you will know which side of the spectrum you fall on (we will talk about these more in tonight’s free workshop on building consistency).
1.Beliefs About Being Wrong
Do you perceive being wrong as a negative event? If so, profitable trading will be very difficult. Cause you will be wrong a lot, usually on a weekly basis, even when you become profitable. Being the wrong part of the time does not mean you cannot make money trading.
Losing Belief Systems
- Being wrong is a negative event
- I want to avoid being wrong
- The market is wrong, not my position
Winning Belief Systems
- Being wrong is a learning experience and helps me grow
- I want to trade profitably, not be right all the time
- The market’s opinion is the one that matters most
2. Beliefs About Losing Money
When deciding to become a trader, you are entering a world where your mistakes and being wrong is punished by losing money. Like with being wrong, losing money is a regular occurrence for a trader:
Losing Belief Systems
- Losing money is a negative event
- I want to avoid losing money at all costs
- I want to make money without risking anything
Winning Belief Systems
- Losing money is the price you pay to see if your trade thesis is correct
- Losing money on any trade is possible
- You have to risk it to get the biscuit
3.Beliefs About Missing Out
There are thousands of opportunities in the markets every day. You will not capitalize on most of them. Missing opportunities to make money is a regular occurrence in trading. If you do not have the right beliefs about missing out, you will have a lot of trouble finding consistency.
Losing Belief Systems
- I need to be a part of that stock’s run
- I need to find a winner because I missed a big mover earlier
- I need to get in now because I don’t want to miss out on a big move
Winning Beliefs Systems
- I will wait for a pullback to enter that stock
- I will wait for an entry signal, regardless of what others stocks have done today
- I will never be able to catch every move in the market
4.Beliefs About Leaving Money on the Table
No one knows how far a stock can rally, or how far a stock can fall. Give up trying to catch tops and bottoms. Focus on capturing the meat of the move. You have to learn how to cope with leaving money on the table in order to develop consistency in your results.
Losing Belief Systems
- I am a bad trader because I sold too early
- I’m not selling here I want a bigger winner
- I’m not taking profits here because I left money on the table earlier, and don’t want to do it again
Winning Belief Systems
- My system gave me a sell signal, so I took my profits. Leaving money on the table happens.
- I will take what the market gives me and not get greedy
- Each trade is independent of one another, it doesn’t matter what that other stock did earlier today.
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