Lack of Methodology
If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. In the long run, guessing isn’t going to work. If you lack a defined trading methodology, then you don’t have a way to know what constitutes a buy or sell signal. Moreover, you can’t even consistently correctly identify the trend.
So, how can you overcome this fatal flaw?
>> Write down your methodology and make clear what analytical tools you use and how you actually use them.
>> It doesn’t matter what indicators you use, but what is more important is you are using your efforts.
>> And one thing to remember is, “If you can’t fit it on the back of a business card, it’s probably too complicated.
Lack of Discipline
The second flaw in trading is lack of discipline. After clear outline and identification of your trading methodology, you should have the discipline to follow your system. If the way you view a price chart or evaluate a potential trade setup is different from how you did it previously, then you have either not identified your methodology or you lack the discipline to follow the methodology identified by you. The formula for success is to consistently apply a proven methodology. So in order to overcome a lack of discipline you should define a trading methodology that works best for you.
Unrealistic Expectations
There are commercials that say something like, “…$5,000 properly positioned in Natural Gas can give you returns of over $40,000…” Advertisements like this are a disservice to the financial industry as a whole and end up costing uneducated investors a lot more than $5,000. Yes, it is possible to experience above-average returns trading your own account. However, it’s difficult to do it without taking on above-average risk. So what is a realistic return to shoot for in your first year as a trader – 50%, 100%, 200%? Whoa, let’s rein in those unrealistic expectations. The goal for every trader their first year out should be not to lose money. If you can manage that, then in year two, try to beat the Dow or the S&P. These goals may not be flashy but they are realistic, and if you can learn to live with them and achieve them you will fend off the Hand.
Lack of Patience
The fourth fatal flaw in trading is Lack of Patience. There’s probably an accurate statement that markets trend only 20% of the time. So think about it, the other 80% of the time the markets are not trending in one clear direction. For example, if you’re a long-term trader, there are typically only two or three compelling tradable moves in a market during any given year. Similarly, if you are a short-term trader, there are only two or three high-quality trade setups in a given week.
All too often, because trading is inherently exciting as it involves money regulation, it’s easy to feel like you’re missing the party if you don’t trade a lot. As a result, you start taking trade setups of lesser and lesser quality and begin to over-trade.
How do you overcome this lack of patience?
>> Don’t worry about missing an opportunity today, because there will be another one tomorrow, next week and next month
Lack of Money Management
The final fatal flaw to overcome as a trader is a Lack of Money Management which is probably the most important part of forex trading. Now the professional traders tend to limit their risk on any given position to 1% – 3% of their portfolio. Simply put, many traders begin to trade either under-funded or without sufficient capital in their trading account to trade the markets they choose to trade. And that doesn’t even address the size that they trade (i.e., multiple contracts).
To overcome this fatal flaw, let’s clear this from a statement.
>> Try to trade small if you got a small trading account.
>> If you want to be a successful trader then the key you ought to realize is longevity, because you will gain more experience in the long-term.