Trading has a dark side. You might already be familiar with it. There are certain ‘evils’ that we are all susceptible to as traders, and you have to deal with them, or they will deal with you.
Our brains are like sponges, absorbing everything we put into them. Whilst this is obviously good in most regards, it can be detrimental to success as a trader. You’ve got to learn to filter out the unnecessary variables from your trading, because if you let your ‘sponge’ get too full, it will become over-saturated and you won’t be able to do anything with it.
Specifically, you’ve got to learn that not everything you come across in the trading realm is worth thinking about, or even considering. The following points discuss some of the evilest trading ‘evils’ that you need to avoid getting ‘possessed’ by, at all costs.
News and Financial Media is Toxic
If you watch the financial news or read financial media publications on or offline, if that news and information is negative, you will become negative about the stock you have invested in, you will become negative about the currency pair or commodity you have traded and so on. Conversely, if that news and information is positive, you will become positive about your trading and investing decisions.
Even a professional seasoned industry veteran will still be influenced by information they are exposed to. The problem with main stream media is that it’s typically produced by people that are not traders and not investors, it’s journalistic content, and created to ‘make the news’…it’s generally always far from accurate and usually after the fact. This is why you’ve probably heard the old saying, “Buy the rumor, sell the news”.
In regards to swing trading, there’s really no point in worrying about economic news events or trying to ‘trade the news’. The more time you put into trying to figure out how XYZ event might affect a particular market, the more likely you are to lose money by over-trading or making a stupid trading mistake. News and really all variables that move a market, are reflected on the raw price action charts of a market, so there’s really just no point in trying to take on the extra analysis of thinking about the news. It’s simply a distraction and a waste of your time and mental energy, and ultimately, it’s a waste of your money.
Screen watching creates trade-aholics
Even if you tell yourself you’re not a day trader/ scalper / gambler, if you watch 1 minute or 5 minute charts all day (lower timeframes), and if you’re watching 20 different charts tiled over your computer screen, you’re going to eventually become a day trading gambler. You can’t say you’re a swing trader who trades higher time frames and still watch lower time frames and hundreds of markets all day every day for ‘entertainment’ sake. It leads to addictive trading behavior which includes unplanned / spur of the moment stupid trades, gamblers addiction (looking for the next high), and so on.
If you sit there for hours on end trying to ‘figure out’ what the 5 minute chart is going to do next, hoping to scalp 10 pips here and 20 pips there, you’re quickly going to find yourself in your doctor’s office asking him for a prescription for Xanax or some other anxiety-reducing drug. You can literally drive yourself mad sitting around watching low time frame charts all day.
Giving in to Greed
I see it all the time. Traders write in to me, explaining how they did very well for a few months and then it “all fell apart”. They lost all their trading profits that they worked so hard for over the last few months, on one or two trades. They did this because they gave into what is perhaps the most dangerous of all ‘trading evils’; greed.
Trading can obviously bring out the greedy side in us. We think to ourselves, “If I can just make XYZ amount of money on this trade, then I’ll start managing my risk properly”. However, that time never comes, because once you put yourself in the mindset of risking more than you are comfortable with losing, you push yourself into an extremely dangerous cycle of emotional trading.
All of the trading ‘evils’ discussed in this lesson are very important to avoid, but if you could only pick one to avoid, it should be greed. You will not make consistent money in the market being greedy. You may do well for a while, but eventually greed will come back to bite you and will result in a blown out trading account.
Following multiple trading strategies doesn’t work
People are exposed to a lot of trading strategies, ideas and philosophies about trading around the internet and from various books, seminars, webinars and so on. For a beginner there is no way you can be confident that this information is real or if it’s the right way to trade or the wrong way to trade, there is a leap of faith a trader takes. The problem with most people is that they take that leap of faith, try a method and study it and then they quickly move on and start ‘adding’ methods and ideas together. I see it all the time, a student joins up to learn my trading strategy, sends in a chart with a question and on that chart are 2 indicators, an ‘a b c Elliot Wave’ annotated on the chart and a squiggly line with 3 beautiful colors I have never seen before, a few trend lines, a few pivot points, and so on.
If you only learned one thing from me and never came back to this site, please take my advice and do not combine multiple trading methods. If what you were doing was working for you previously, why would you be here looking for something else? Think about it logically!
If you have taken yet another leap of faith and are here wanting to learn what you now believe is the right way to trade (i.e. my price action trading methods), then leave all your prior knowledge at the door, leave the ego at the door, leave the analytical obsessive-compulsive behavior behind, let go of this compulsive obsession to find a use for ‘everything you have ever learned … it’s time to start with a fresh outlook and perspective, be a blank canvas, wipe the slate clean and allow your mind to re-learn and evolve into the trading powerhouse you know you can and need to become.
Not trusting yourself
Another dangerous ‘evil’ to give into when trading, is not trusting yourself. You have to trust what you know and trust your trading abilities. If you are constantly influenced by other people’s opinions, you won’t last long in the market.
Trading is an intensely personal journey, and you ultimately need to develop an intimate feel for the market and get ‘in the zone’. If you allow others’ opinions to influence you, it will really do nothing but corrupt your own personal sense of the market and what it’s doing / where it might go next. Everyone has an opinion on the market, but what matters is whether or not you can trust yourself and rely on your own trading abilities and decisions, not someone else’s.
If you don’t have the self-discipline to stick to your trades and see your trading edge play out over a large series of trades, you will never make money over the long-run.
Learn an effective trading method like the price action strategies I teach in my trading course, make it make sense to you, get in touch with the ebb and flow of the market (in the zone), and then to hell with everyone else. Remember, opinions are a dime a dozen, real consistent trading results are not built on other people’s opinions, they are built on you trusting yourself and your trading method.
It’s hard for people to accept that what they had been studying or what they had been doing for many years is probably a complete waste of time and probably toxic financially and emotionally. As humans and as traders, we have an attachment to the journey we have taken so far (even if we know it was wrong or leading to losses and toxic behavior), we have an ego and we can’t let go. Well, today, right now, I want you to face whatever ‘evil’ has been holding you back and banish it from your life forever. You need to get out of your own way and stop making ‘unforced trading errors’ if you ever want to have a real shot at long-term trading success.