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Are You Making These Trading Mistakes? (Hint: You Probably Are)

Today, I saw this tweet from Brandon (@EliteOptions2 ) about accepting your frailties and becoming a consistent trader. Coming from an IT background, I was always used to developing a perfect software solution (not having bugs) and was not able to accept the fact that however good your trading system is, it will not be perfect. I moved from one trading system to the other that would perfectly predict the tops and lows of the price move. I became so good at talking about the systems but could not meet my goals and in fact, was continuously losing money. Can anyone relate to this?

Trading started working for me when I began to accept that I am not a perfect trader and the market is always right. I understood that I had to develop the right mindset. Below, I have mentioned four truths that we have to accept about ourselves to become a consistent and profitable trader.

1. Accept you will sell early

Think of trading stocks like a train journey. Everyone gets out at their stop and does not go till the end. Similarly, you should execute your trading plan ( for example, sell at 50%, 100%, 150%....) and not worry about if you get out early. For example, today I played

$MSTR 900-940 Put vertical credit spread for 27.78 and my target for

$MSTR was 955 but it had gone to 1000 today. I had bought my put spread for 20$ at my target stock price and was happy with the profits as I had followed my trading plan to the T.

2. Accept you will make mistakes

Trading in the Zone book by Michael Douglas was an eye-opener for me. In that book, the author asks a question - For every stock bought by a trader, there is a trader who is selling and the market is a zero-sum game. What makes you think you are smarter than the trader on the other side. The market has so many nuances and it is impossible to understand them all. U may get it wrong. Accept gracefully if you are wrong and exit the trade as per your trading plan and edge.

3. Accept you will take losses

The number one priority in trading is to preserve capital and manage risk. The best way to preserve or increase capital is to maximize the gains and minimize your losses. Have the mindset that the market is always right and U had made a mistake by entering the wrong side. Exit the trade as per your edge (risk management). Usually, I exit the trade when the technicals that were conducive to entering the trade are broken and no longer valid. Losses are part of the game. Even the best traders have a winning percentage of only 70%. Stay focused on your goals and not focus on winning every trade.

4. Accept you will execute poorly

I have been trading for so many years and still, I execute poor trades. Initially, I was frustrated and mad at myself and this resulted in me not having the right mindset which in turn led to more losses. What I learned over the years was that it was inevitable to prevent poor trades. But, What can be avoided is my reaction after the execution of poor trades. Instead of becoming mad, I began to think about what could I have done to avoid this situation and started journaling the learnings. Over a while, I started identifying patterns (to take the trade or not) on the charts easily and became good at making decisions. I am pretty sure that every pattern like cup and handle, inverse head, and shoulders were identified after studying the charts over a while when a trade was executed poorly. Today, I have my own set of patterns as part of my edge that tells me to enter a trade or not. And, so will you when you are kind to yourself and learn from the poorly executed trades.

As a trader, My goal has been always to become more consistent than yesterday and the results have taken care of themselves. As a consistent trader, I accept that I will have bad trading days and always have the mindset to look for solutions to get back on track.

Thanks for reading so far!!!

Looking forward to hearing your thoughts!!!

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