The 3 Biggest Mistakes Traders Make
We asked our followers on Instagram how their emotions impacted the mistakes they made while traded.
Whether it’s the anxiety of not knowing when to take profits, exiting early because of fear, or only wanting to find the next AMC or Dogecoin, there were hundreds of responses as to why many of you were losing money in the market.
In this post, we are breaking down the top three mistakes made when emotions impact trading based on what you have told us and how to fix them!
Mistake #1: Getting greedy with profits
If you are so overly focused on gaining money, you won’t be able to focus on the downside of each trade. Failing to assess the risk to reward of each trade you take is the biggest mistake you can make.
Many of our followers stated they find themselves caught up getting greedy with profits because of the major gains they see on social media. The only thing that comes from comparing your gains to others is a skewed reality of what trading really is.
The answer to growing to be a successful trader is simple. Focus on percentage gains to be like the traders you see on Instagram. The people who focus on the dollar amount are the ones who wreck their accounts.
Trading is a skill that takes years to master. People who make it look easy, make it look that way because they’ve been doing it for years. They started right where you are starting. The only difference is they compared their progress to their past self than to seasoned traders on social media.
I’ve yet to see a situation where greed made anyone more successful or happy in life. Stop comparing yourself to anyone but who you were yesterday. That is the only way to improve.
Mistake #2: Overtrading
Overtrading can stem from many emotions with the main two being overconfidence and anger.
When you are overtrading, how do you know which emotion you are dealing with?
Overconfidence:
- Thinking you cannot fail and trading excessively due to it
- Overestimating your knowledge and underestimating the risk
- Refusing to accept that poor trading results are due to your own actions (something else was at fault)
- Thinking you know better than the market
Anger:
- Hasty decisions are made based on previous bad trades
- Your self worth starts to dwindle because you took a bad trade
- You’re trading to be right, not to make money
- Having unfulfilled expectations in your trades
Not trading is also a form of trading. If you notice you are overtrading, turn off your trading platform for a couple of days to shake yourself out of it. Otherwise, it becomes more of an addiction or gambling mindset than it does a trading mindset.
Mistake #3: Letting FOMO control you
FOMO, or fear of missing out, has brought many retail traders into the market this past year. GME, AMC, and Dogecoin made people into millionaires literally overnight and skewed the perception of investing greatly.
Thoughts that a FOMO trader may have:
- “Just think how much money I could make…”
- “I don’t want to miss out on a great opportunity.”
- “If everyone else is getting in, it’s going to keep going up.”
How to overcome FOMO:
- Don’t trade without a plan
- Stop believing everything you hear and do your own research
- Remember that there will always be another trade
Remember… the market has no emotions, you do. The consequences of your actions, good or bad, are on you and how you handle your feelings.
In conclusion…
When you are dealing with these mistakes, they seem impossible to overcome. It just takes time, self-control, and patience to be able to not let these mistakes get the best of you again.
In review, to become a better trader, you need to try and avoid these mistakes:
- Stop getting greedy with your profits
- If you have the urge to overtrade, walk away
- If you’re feeling FOMO, it’s too late to jump in
Which of these top three most common trading mistakes do you feel you struggle with most?
