People are wondering what is the number one mistake traders make. The answer to this is more complicated because mistakes typically happen in pairs. The usual errors are undercapitalization, poor risk management, poor analysis, lack of robust trading strategy, and the list goes on. Though all of the listed uncertainty would be in the running, the answer comes down to one thing: lack of patience.
Most traders believe that the number one mistake in forex trading is improper position sizing. And that is the standard de facto answer many analysts and forex pundits give. Although that is a crucial concern with most retail traders, they can whittle that down to simply being a complete lack of patience. Nevertheless, traders must think of the cause of improper position sizing: the ‘get-rich-quick mindset. So, that is a lack of patience at its core.
No Trading System
With no trading system or one that is reliable, it might be because of a lack of patience too. And that is because traders did not make time to develop a system to place the trade. Also, they did not open a time to learn technical analysis or other things that they would base their trading system around. And even if they did, it will worth nothing if they did not test it.
A real trading system has been tested. They should understand what the expectancy is. And if they did not do any of this, traders are just trying to run before they could even walk. The lack of patience will cause money.
Breaking the Rules
For example, traders have done everything correctly and have a decent trading system that can make money over the long-term. But as they sit down in their terminal in the morning and realize that it is very little in the path of strong trading setups. Sadly, most traders will go ahead and continue to trade out of a lack of patience. As a result, they will make poor decisions and definitely lose money as the market will be somehow directionless or not lined up with their strength. Keep in mind that traders earn by sitting in their hands and wait for a proper setup.
Just as mentioned, revenge trading is also a lack of patience. It is because when people take a loss, they will try to get the money back.
For instance, when traders thought they had a valid trade set up, some unexpected events spooked the market and took them out. And with that kind of event, it’s hard not to take them personally. So, the first thing they will think of doing is to get the money back.
But as they do a bit of revenge trading, they are more likely to lose money – aside from the original loss. By not waiting for the next proper setup, they are declaring a complete lack of patience. And this is deadly when it comes to forex trading. Always remember that once people lose money, that’s it. If they do it often enough, they won’t have enough money to continue trading.
Trading is not a sprint; it is a marathon. The truth is, one of the essential parts of trading is the number of lessons it will carry into traders’ daily life outside of the realm of trading. Practicing more extended patience is, without a doubt, one of the main lessons the market can teach.
Having enough patience goes a long way in nearly any ailments that a trader experience. After all, if they sit on the sidelines and closely watch things calmly and rationally, they would typically find a solution. But in the heat of the trading session, it’s not easy to do it.