“If you change nothing, Nothing will change”

As they say that 95% of the traders lose money in the Markets.

Still, Most people never try to know why they are losing, and just keep trading the markets like it’s some sort of a video game, where you play till you lose all your chips.

And once you lose all your chips, any amount of knowledge or realization will not be sufficient to make a comeback.

So, it’s our responsibility to find the faults in our process and correct them.

In this article, I will give you a framework which, if you follow, will at least not let you lose money in the markets and with time will turn you into a profitable trader.

Let’s begin.

STOP! Take a bird’s eye view

Most people do not accept it, but they are addicted to trading.

That’s the number one reason they never stop doing it until they lose all their money.

How to know if you are addicted?

If you can’t sit out even for a day without taking a trade, then you are definitely addicted to trading.

If you are taking a position just for the thrill or when you feel bored,then you are addicted to trading.

If you always want to have some sort of a position in markets, even when you planned to sit out, then you are addicted to trading.

See, when we are addicted to something we can’t perceive things rationally, other than the urge to do that thing repeatedly.

And Trading addiction is the same, traders keep placing the trades one after the other.

The adrenaline rush and the thrill keeps them stuck to the game for a long long time.

They are constantly losing money, yet if you ask them if they are doing the right thing, they will be like, yeah, I always make money, just that one trade cost me so much that I’m in drawdown.

So, the first step is to know whether you are addicted to trading or not?

Once you realize that only you can change something, then only you can do something about it.

Otherwise, the game never stops!

Find the leakage

See, there are very few reasons why someone might be losing money in the markets.

It might be that your losers are 10 times bigger than your profits, which means that your risk management is wrong.

If you are losing 9 times out of 10 then your Entry and exit criteria might be wrong and you may have to work on your charts.

If you are making money 8 times out of 10 and still losing money, then you are probably cutting your profits smaller and letting your losers run.

Whatever the problem is, first know that it can be solved if you work on it.

Your Trading journal will give you all the answers to your problem.

If you do not know what a trading journal is.

It basically contains your Entry, Exit, SL, a reason to enter a trade, the reason to exit the trade, weekly review, Trade review, Holding period of the trade, etc.

You will find repeated patterns in your journal.

The number 1 reason I find in traders that are losing money is that their 1 trade takes away the profit of the last 20 trades.

How is it happening?

There could be many reasons behind it

1. Not cutting the loss at the decided SL level.

2. Trading without an SL.

3. Uneven position sizing (when the trader takes too much risk on a

particular trade in which they have high confidence and that turns out to be a loser).

4. Cutting profits too early.

So, the first step is to find the reasons because of which you are losing money, to know the reasons check your trading journal.

If you do not have one, make it now.

Fix the Leakage

After knowing the problem, now it’s time to find the solution to the problem.

But, before that let me tell you a story about one of my friends.

He is an intraday stock trader and has an accuracy of about 60-70% which is quite good.

But, every 1 to 2 months he calls me and tells me that he has lost 10-15% of his account on that day, now this has happened 4-5 times.

It’s not that he does not make profits, but he wipes out all the profits on these 4-5 occasions.

So, even when 7 out of 10 trades are winners, he is losing money.

I asked him to put a total loss limit for the day to 2%, whenever it gets hit, close the system and do not trade further on that day.

He said that from here on I will follow this rule.

Now, Again he calls me one day and said “Bhai Aaj Phir kaand ho Gaya” ( he lost 7-8% of his account)

I asked him why you didn’t follow the 2% risk rule. He said that I was not expecting to get a loss today, and was expecting a very good day instead.

Even after knowing the mistake that he was making in the past, he repeated it again and paid the price.

This means that even if you know where the problem is, and know how to fix it, you still have to follow the rules, if not then again bad things are bound to happen.

Now, let’s get back to the topic.

Once you have found out where your losses are coming from or what is not letting your equity curve go higher, Now it’s time to fix it.

Say you have good accuracy but one trade is wiping out all of your profits.

How can you fix it?

By becoming stricter with your risk management.

Find your SL level before you enter a trade.

Try to put SL in the system just after you enter a trade, and don’t keep it in your mind.

Try not to change the SL level from your pre-decided levels.

Remember that your losses will come from that single trade, so you have to be disciplined all of the time, otherwise, nothing will change.

This was just one example, whatever it is that is making your equity curve go down, you can fix it.

The answer lies in your previous trades, find it.

Take the Responsibility

The real reason why most traders do not make money is that they do not want to take responsibility for their decisions.

Taking responsibility is hard, as it makes us question ourselves, our beliefs, our knowledge.

Losing traders always try to blame someone else, their broker, Luck, Network, Tools, God, because it lets them not think about where “they” went wrong.

Once a trader accepts that whatever results he is getting is because of his actions and not because of others, that day will be the turning point in the trader’s journey.

Because you have accepted that your P&L is a reflection of your actions, it will be easier for you to find the faults inside your process and mindset because of which you are not making money.

Beliefs

Question and then eliminate those beliefs which are not helping you to make money.

What do I mean by this?

Every trader has some sort of a belief about how things function in the market.

For example, some traders believe that trendlines work, and some believe that they don’t.

Some believe that they should buy cheap stocks thus they buy 52 week low stocks and some believe that they should buy expensive stocks because they are expensive for a reason thus they buy 52 week high stocks.

These are just a few examples, like this, we have many beliefs.

So, what I’m trying to say is that we should eliminate all those beliefs that are not helping us make money.

Say, If you are a believer in averaging down and think that pyramiding (averaging up) is a dumb thing to do, as to why buy when the price is going higher, as it will make your buying average go higher.

This is a belief.

But, is it working for you? If yes then your P&L should reflect the same.

Is it reflecting the green? Then you are doing the right thing.

Is it not reflecting the Green? Then it’s time to Eliminate that belief.

Find those beliefs which are limiting your performance, and then slowly eliminate them.

You will see a positive change in your performance.

It’s not easy to change our beliefs, but it’s the only way to go forward.

It’s a long journey

From finding the leakages in your system to fixing them, now it’s time to keep repeating the process for a long time.

See, It’s not like if you find the problem and learn how to correct it, you are suddenly going to be profitable.

It will take its time, you will have to keep repeating the trial and error process.

And even when you have a perfectly sounding system, which has a positive edge, there is still one thing that will make the difference.

And that is a winning mindset.

Winning Mindset

There are basically 3 types of Mindsets that Market participants have:

Euphoria Mindset

It is a beginner’s mindset, when a beginner is going through winning streaks, they are in the “zone”, but they just have one problem, they can’t assess the risk properly as they have not gone through the pain and fear yet which leads them to taking unnecessary risks.

Fear Mindset

Most of the market participants are of this mindset, this usually comes after the euphoria mindset, when a trader takes huge risks and then things turn upside down, the result of which is the fear mindset.

Winning Mindset

A winning mindset is when a trader expects to have positive Trading results, but is also content with whatever the market gives him whether a profit or a loss.

This is the Zen mode in trading, where the trader gets affected neither by the profits nor by the losses.

In the other two mindsets, there is either excessive Greed which leads to High risks, and on the other side, there is huge Negativity where the trader fears even taking the next trade.

So, how can one go from a fear mindset to a winning mindset?

Truly accept the Risk

Every trader knows that there is a risk involved in every trade but do they truly accept the risk?

Knowing and accepting are two different things, most traders know they are risking a certain portion of their portfolio on a trade but they don’t accept the risk.

By accepting what I mean is that they are not content with losing money on a trade.

And once a trade starts to go against them, they will do everything to not lose money, from removing stop loss to averaging down.

Which will eventually lead to a bigger loss.

They lose the ability to rationally think about the information that the market is providing them.

The same is the case when the trade goes in the profit direction, they will tend to take the market generation information in a wrong way, and will exit on any pullbacks, which might not be the part of their plan.

This will stop them from making bigger profits.

Until you truly accept the risk that you are taking, nothing will change.

Final Thoughts

For most people, the answer for profitability is learning more about technical analysis.

Though in my opinion the key to trading success lies inside your mindset and not anywhere else.

So, Before trying to know more about the indicators or charts try to know a bit more about yourself.

And you might find the answer.

So, that’s it for today from my side, if you liked reading this article then do share it with your friends over social media.

Thanks for reading.