The biggest trading mistakes that cost me Lakhs of Rupees. (Part 2)

“A smart man makes a mistake, learns from it, and never makes that mistake again. But a wise man finds a smart man and learns from him how to avoid the mistake altogether.”

-Roy H. Williams

Though I have made a lot of mistakes in my trading career and have gone through the worst and the best times.

Through this article maybe I will be able to make someone avoid at least a few of them.

So, here are the biggest mistakes and the lessons that I learned from them.

Mistake Number 1: Not having an Exit Plan!

In the first few years of trading, Most Traders focus too much upon the entries, as we think that it’s the most important part of Trading.

And because of this, we forget about the most important part of Trading, which is where to exit!

Most of the traders don’t have an exit plan, which includes where they will take an exit from their positions.

An exit plan includes what you will do if the stock opens 20% down from your entry or 20% up from your entry.

It includes all the worst-case and the best-case conditions that can happen after you take a position.

BUT!

We take the trade first, and then think about where we are going to exit?

And that’s the problem!

Not having an exit plan creates confusion in your mind, and confusion leads to Bad trading decisions.

Not having an exit plan leads to Regret!

Ahh, why did I booked this stock here! It went 10% higher from my exit, or Ohh why didn’t I sell the stock when it was giving me 10% profit, it’s back to my cost price now.

Most of you might have asked the above questions to yourself.

But we never try to understand why we do that? Number 1 is not having an “exit plan” and Number 2 is not having “faith” in your exit plan.

Even those Traders who have an exit plan, sometimes are in a state of confusion.

Why?

It’s because they don’t have faith in their exit plan.

There are many ways to exit, Trailing your stop loss, selling into strength, Selling on Different R multiples, etc.

See, these methods have their Pros and cons:

For example, a trailing stop loss will help you to take some of the big moves but most of the time you will be selling at cost price!

Selling into a strength exit model will give you moderate exits most of the time, but you will not be able to ride Few Massive trends!

So each method has some kind of a trade-off! It’s up to you which trade-off you can live by.

If you get in peace with the method that you choose, you will never be in a state of confusion ever.

Mistake Number 2: Overtrading

You will lose more money overtrading than anything else!

Believe me, even when I read this a few years back I was like how can someone lose money trading more, if we use a stop loss we should be fine!

I was wrong!

See, the market goes through different phases, it could be a Trending, dull, bullish, or bearish phase.

Everything else is fine, but when the dull period or the big range consolidations are formed, We tend to lose the most.

Not because the market is in range, it’s because of how it changes our mindset!

When we get 2-3 stop losses in a row, most traders tend to get angry, like the market snatched something that they deserved, and now the market is their enemy, and they say “Aaj to Dekha jaayega”.

This anger, frustration will lead to suboptimal trades, resulting in even more stop losses!

This creates a spiral effect of losing money, blaming the markets, losing your mind, and again losing money!

So, if you can observe that it’s not just because the market is in range or you lost 3-4 trades in a row, it’s because you choose to be angry instead of accepting that it’s not the right environment to trade more.

It’s because you took the trades which you would have never taken in normal conditions, it’s because you thought that the market is your enemy and you can win the money back.

Only when the market wants to give money gracefully take it, if you try to take the money when you want, it will take 10X back.

This is from a POV of a Positional trader, you can change it to your convenience.

Always remember, we never lose money because of the markets, we lose money because of our mindset.

Mistake Number 3: Building Bad habits!

Small habits don’t add up, they compound.

And it’s true for both good and bad habits.

As traders, Our performance depends not upon how better plans we make but how we follow those plans.

But Sometimes when we break our rules and the results are still good, we develop some bad habits.

How?

Have you ever changed your stop-loss level when the price is heading towards your stop loss?

And then the stock reverses back, right from where your initial stop was.

You are happy that you saved your SL by playing smart, Right?

Wrong, You just permitted yourself to change the SL level whenever the Price comes towards it from here on.

But what happens when the stock does not reverse back? And you keep lowering the SL?

Remember this, you can make 100% or 200% without following your rules, but only 1 trade is enough to wipe you out from this business!

The reason we choose to build these bad habits is that we do not want short term pain:

The pain of hitting the SL, the pain of the trade reversing and taking all the profits back, the pain of not making anything over a few trades.

This short-term pain is what the Mature players embrace and that’s how they get long-term gain.

Mistake Number 4: Not taking Ownership of My Decisions

You will see that most losing traders are very bad at taking ownership of their decisions and results.

They always play the blame game!

“I lost because my broker was down”.

“I am losing money because my account size is very small”.

“If I had more money I would have been profitable”.

“I lost money because I am not lucky!”

These are some phrases that you will keep hearing from these traders.

You will see that whatever result they are getting, they always find a reason to not take any ownership of those results.

And that’s why they are not able to improve and find solutions to the mistakes they are making.

Until and unless one accepts that they are the one in charge and whatever result they are getting is due to their decisions, they are not going to improve.

Not taking this in a negative way, but taking it as self-analysis.

Once you do this, a whole new world of possibilities will open and you will be able to see where you are getting wrong and how you can improve upon your weaknesses.

Mistake Number 5: Self-sabotaging beliefs

Why am I so dumb?

Why am I so unlucky?

I don’t think I will ever be able to make any money ever in my life through trading.

Have you ever said similar things to yourself?

Then you are self-sabotaging yourself.

When I first read about this topic, I thought it was only good for reading purposes but not practical, I was wrong!

But, What do Self-sabotaging beliefs have to do with your Trading performance?

Self-sabotaging beliefs tell us that a person has Bad self-image which results in lower confidence, and believe it or not, self-confidence is a very important part of being a successful trader.

You can learn all the strategies and methods but until and unless you get confident, Money will just come and go.

So, why do we have self-sabotaging beliefs?

These are not a result of one day or single action, these start with small thoughts, and then they keep accumulating and getting stronger as we repeat them again and again.

Those words that you repeat unintentionally, shape your beliefs and then shape your life.

When you get a setback, don’t say “why I’m so bad at this” or “I am an idiot”, say that “ What can I learn from this, which will help me to improve me in future”.

Whenever you do good in something, don’t say that “I just got lucky and will probably screw something in future” say that “Yes, all the hard work that I did is paying off”.

Trust me, this looks Cliche, but this is the only way to get into a winning mindset.

We have been sabotaging ourselves for so long that we can’t even think about a positive possibility.

So, if you really want to do something, not only in trading but anything big that you want to do in life then please stop talking shit to yourself.

Mistake Number 6: Finding the Secret for Trading success

When I started trading, I always thought that there is some secret that only the big traders know and that’s the reason they make money.

Normally we call these secrets, the “STRATEGIES”.

As a beginner I thought that I needed to know about this strategy, I thought it’s like a block of code which we put into a computer and it will make money for us, while we will sit back and enjoy our life.

I always asked others about these strategies, but I never got a clear answer to that question.

Some told me to learn about support and resistance, Read books, few asked me to join paid services, But no one told me what the hell is this strategy.

Well, I have to find the answers on my own.

And I got it.

There is no “strategy”.

What I meant by this is Making money as a trader is not the result of a single thing, it’s the cumulative knowledge that you get while making all sorts of mistakes and then correcting them.

The calmness that you develop, the discipline that you have to maintain to follow the plan even when you are losing money and the time that you give to read all those charts are all equally important for being a successful trader.

There are plenty of websites and People that will give you buy and sell signals, and will sell you “Rule-based systems”, you might think that you will just learn those strategies and then apply them from the next day.

But, let me tell you, no one can teach you to be disciplined, No one can make you follow your plan other than yourself, No one can give you their experience, No one make you follow the rules, No one can transfer their confidence in their system to you.

You get the point?

You are playing a long-term game, but you want to be perfect in a few hours.

You should know that Trading requires equal if not more hard work and persistence than any other Professional field, so stop taking it as a lottery and start to take it as a Business.

Mistake Number 7: Comparing myself to others

See, we as humans love to compare our results to others.

We have always been taught to not compare ourselves with others, but as they say, most of us do not do what we preach.

As even during school time the parents compare the results of their child with the most intelligent student in the class.

And we keep on doing similar comparisons for our whole life, in college, in our work, in business, in lifestyle, etc.

In trading, we mostly compare our results to our online friends and influencers.

And one or the other person online is always making money, even when we are struggling to break even.

At those times, we feel that we are left behind and our confidence and motivation both take a dip.

We feel that, are we doing something wrong?

See, the problem is not in the person who is posting profits or telling about their huge returns on the internet, but the problem is with our mindset.

First of all, we need to understand that everything is exaggerated on the internet.

The Person on the internet that you think is living a perfect life, is only showing you the best of what they have got.

And nobody likes to share their failures on the internet.

We always complain about clickbait on the internet, right?

So, which one are you more likely to click from the below two topics

1. How I made 100% returns in a month.

2. Learn to trade with support and resistance.

You are probably more likely to click on the first one.

So, the internet has to show you the content with clickbait titles, Posh lifestyle, and easy money.

And nothing is wrong with it, we only like that type of content.

Now, considering that those Profits that you see on the internet are real.

So, the other person might have experience of trading profitably for 10 years and he has perfected his skills over time.

And say you have 2 years of experience.

So, if you compare your results with that person who is at Level 100 in trading while you are only at Level 5, then you are bound to get discouraged.

Also, we fail to understand that the circumstances, the resources are different for every individual.

For you, 10k might be nothing, but for someone else, it might be just a dream.

And this is what makes different results.

For someone, if they blow their accounts, it might not be a big thing, as they might have a well-paying job, or their dad might be ultrarich, while this might not be true for you.

So, different conditions and life stages will lead to different results between individuals.

Even a same strategy will give different results for different individuals, if you understand position sizing, you might relate to this.

Once, I was sitting with a guy who was around 50 years old. He is also into the markets.

I observed that he was also figuring out the similar things that I was figuring out, the FOMO, discipline issues, etc.

That was a Eureka moment for me. I realized that there is nothing like being left behind in life. There will always be someone doing better than you and someone who is doing worse than you.

I learned that if we really want to be happy in life, we have to let go of these comparisons between ourselves and others, as everyone has a different story and situation.

We don’t even know what we will be doing 1 year from now. A person who is nothing as of now may achieve something that he never even thought of achieving in his dreams.

Mistake Number 8: Bad company

As they say, You become what you consume.

The type of people you hang around with and the people you follow on the internet has a big impact on Mindset, which means they are indirectly affecting your life and work.

So, if you follow the right guys, your life and work are going to get better.

But, most guys make the mistake of following the wrong people.

Who are these “Wrong” People?

The Basic quality of these guys is that they talk more about others than themselves. (Not in a Good way)

These guys do one thing best, and that is to find fault in others.

And I get it, if you are calling out a fraudster with proof, that’s good, but see, calling out a fraudster and bitching about everyone who is doing better than you are two different things.

Now, you might just be following these guys just for the sake of fun, and you just enjoy the fights that these guys do with others.

Let me tell you, this negativity is going to creep into your mindset, and let me repeat it, your mindset is the most important asset as a trader.

And the Bitching and shit talks that you are consuming will have a direct impact on your trading results.

As Darren Hardy writes in The Compound Effect:

“According to research by social psychologist Dr. David McClelland of Harvard, [the people you habitually associate with] determine as much as 95 percent of your success or failure in life.”

So, if you are spending your precious time, bitching about others, think again.

Sometimes, we end up following these guys, and end up being friends with them, and have conversations with each other.

Once I realize that I’m getting into the conversations about others, I try to change the topic and have conversations about other things.

So, who should you follow on social media then?

Follow the people that you admire, the people who you want to be like, those who are doing the things you want to do someday.

These are only my views, and yours can be totally different, and that’s fine.

So, that’s all for today from my side, I will meet you again next week.

If you have got any value from this article, then please share it with the one who you think needs this right now.

Thanks for reading

Trader knight