1. Too Wide of a GazeOur first problem is one you may not initially have thought about, but once I tell you what it is, you'll realize it's no different in any other area of your life. By this I mean, when you want to be successful at something you absolutely must be focused. I can't repeat this enough, you must be focused. You can't be looking at 5 different markets or 500 different stocks, currencies, options, commodities, ETFS.... you name it.
We've seen newbie traders who have obviously seen pictures of traders starring at multiple screen setups, run out and spend huge amounts of money setting up 5 or 6 screens and a giant trading office without even placing a trade! Then they start trying to watch any market that goes up, down or sideways. Think of this as a jack of markets and master of none, because that is what you'll be if you try and trade a bunch of different markets and trading vehicles. You'll spend endless amounts of time gazing at so many different markets and variables that could effect those markets... that you'll stress yourself out to your limit and lose your money at the same time.
This may fly in the face of what others out there are teaching and want to you to believe, but I wholeheartedly believe in this. In fact, think about it really deeply for a minute... doesn't it just make sense? Think back in your life when you did something successfully, were you concentrating your focus on a ton of different things?
For the record, let me just say, it is not just my opinion that the more you look at, the more you blur your focus and the less you will be successful. I have the proof of seeing and knowing thousands of traders, this has allowed me to witness first hand what makes them successful. The worst part about this is it is a totally unnecessary. It's a complete waste of your time and your life.
When you understand the potential in the Eminis and how to trade them, there will be no reason to look anywhere else. All the opportunity is in one place. And yes... you guessed it, this is exactly why we only focus on the Eminis!
2. Over-complication
Everything should be made as simple as possible, but not simpler. - Albert Einstein
I could not have said it better. Another reason why traders fail is over-complication. The human brain is amazing, it's able to understand complicated and intricate principles but sometimes unable to see the simple and obvious. Even worse, often when someone is shown the simple and obvious way to do something, they won't do it! For some crazy reason, people love hyped up, sexy indicators and fancy strategies.
They also love to complicate their lives.I don't know how many times I've seen or heard someone say they have some new indicator or oscillator that will revolutionize trading. The trading world is full of people who've embarked on the quest for the holy grail of indicators only to come back with a handful of sand.
I'm going to let you in on a little secret... there is no secrets to trading, and anyone who says there is, is full of it. I have seen people spend unbelievable amounts of time creating custom indicators that when backtested do nothing better then ones already available.
Why are they no better? Well, one good reason is that many are derived from the same source (price) and they all tell you where the price is compared to where it was in the past. I'm still waiting for someone to come up with the magic indicator to tell me where price is GOING TO GO. I'm just kidding there, but it seems that's what some people are out there trying to do.
Another big issue I've seen which is quite common is traders adding more and more indicators, oscillators and chart overlays to try and get a "better picture" or "more confirmation." As an example, I've never seen a successful trader with his/her screen loaded up with 5 indicators, 5 moving averages, Bollinger Bands, Linear Regression lines ALL AT THE SAME TIME. But hey, if you think more is better and provides better confirmation then why not add everything but the kitchen sink? I hope you see where I'm going with this.
An important rule in trading: the more complicated it is, the less chance that it will work. This also goes for backtesting and creating systems... often complicated systems suffer from curve fitting and are unrealistic for the real markets. If you have some experience with creating and testing systems, then I'm not telling you anything new. It really is a double whammy, not only do they not work as well, they are harder and more complicated to follow and learn. This is why we keep our method of trading at Traders International so simple.
3. Thinking One Strategy fits to all markets
Another mistake many rookie traders make (and you hear repeated in many trading books and courses) is they think that because one strategy or system works in one market that it will work in all markets. Once again this just isn't true. The truth is every market is different and each market and time frame has different kinds of people trading them.
To be successful at trading, you need something that works. Markets require testing and a proper proven trading methodology, and unfortunately... effective methodologies often do not transfer over to all markets and time-frames. So whenever you read books or courses that say this system or strategy will work on any market and any time frame, I would be skeptical. If you've read any trading books out there, you already know how many of them say this. The quickest way to find this out for yourself is to go trade another market and find out. This is why we ONLY concentrate on Eminis and we use tested methods that we know work in that market.
4. Having a deep opinion and over thinking
If you are new to trading you might wonder about this one because you haven't experienced it. Unfortunately much in trading is counter intuitive. Many people think you have know every detail about what you are trading to be successful. Some people think if they spend hours and hours delving deeply into their favorite stocks, commodities, currencies, the economy, sectors, the countries ... and on and on that they won't go broke.
But this isn't true, many stock, Forex and commodity traders end up going broke for this very reason. I know it sounds crazy but hear me out. The more you think you "know", the more you will hang onto your opinion and biases if the trade goes against you. This will also make it hard for you to get out of the trade psychologically. You'll say to yourself "I have done the research, I know this will happen." You will have so much invested in the decision making process that it will be very hard to admit you are wrong. The truth is markets are very complicated creatures that you will never be able to rationally understand at a complete level, it's impossible. So what do you want to do, how should you accomplish your goals?
All you need is a proven system that works and proper money management. That's it, simple. Nothing else! You don't want any opinion, you want to let the market tell you what it's doing. You don't need to think, you need to know how to think in probabilities and follow a proven methodology. This is also why many beginners, if and when they have the proper training... can pick up trading just as fast if not faster then someone with experience. They don't have any baggage, they have no voices in their head saying "this is too simple..." or "you must need to follow more then this to be successful..." Like I said before, many people have to work hard to stomp out their ability to overcomplicate things. This is a little like the zen mindset. You really have to learn to let go, keep it simple, trust the system, the signals, your training... and think in probabilities. The secret of implementing the system is your mindset which is what we mentor and teach you.
Let me give a good example in something else. Working out and dieting. You could read and analyze every darn book on dieting and training out there, and still not accomplish any of your goals. In fact, you may end up more and more confused with all these different methods conflicting the other method, jumping from one to the other. But, what if I gave you a sound tested method that has been proven to work, one that has had double blind placebo tests and multiple university studies? Then I gave you a
personal trainer and a nutritionist to make sure you followed the workout and the diet properly everyday, until it became your second nature?
Do you see what I'm getting at? This is what we do for you. We give you the system, the methodology and then professional traders who trade real money everyday "hand hold " you through the learning process. First you practice in simulation mode without real money. Once you get the hang of it and are confident and consistent, you go live with real money. All this time, we are here guiding and helping you.
5. Not enough education and not enough of the right education
I wanted to put this one up right after number 4 to make sure you realize not to neglect this very important point. I think you'd be better off over analyzing like I was pointing out in point number 4 then doing nothing. BUT, I personally think that 'not enough education' is NOT one of the biggest reasons traders fail. Huh? Then what is it you say? Well it's really simple actually... I will go a step further and say one of the biggest reasons traders fail is because they do not have enough of the RIGHT EDUCATION.
You see, I really believe there is very few people that come into trading these days who don't even open a book or educate themselves a bit, the problem is.. so much of the education they get is horrible. Actually let's be frank... it sucks.
So what is the RIGHT EDUCATION? Well I will cover half in the next point, but it's quite simple... a working methodology and the ability to implement it. I know that sound so straight forward and simplistic... but it is true. You need a properly tested trading system and methodology that has been proven, then you need the mental mentoring and training to stay focused and follow it. (I know I may be sounding like a broken record, really that's the point, I hope I do, because this is so important.)
To do this you need to surround yourself with successful traders who are actually trading a method exactly like you will be learning. Then, you need to practice in the live market and learn and follow them. This is education you can't find in books. Doesn't this just make sense? The truth is ... it really is how we learn best in any other endeavor, so why not trading and making
money? There is a reason why 95% of people fail in trading, it's because they don't do this. Like I said before, I really don't believe there is many gunslinger types anymore who walk in without virtually any so called "trading education". There is a ton who read books and go trade, and they lose, and lose a lot. This ends up costing them not only a fortune, but it wastes precious time. The solution really shouldn't be amazing to you, do it right the first time!
6. Lack of a Trading Plan- Not having a proven trading methodology and road map
Ahhh, the biggest one! Most people who come into trading read a few books or visit some websites which provide the "same old song and dance" as all the rest and go into the market and get slaughtered. First off, you must realize trading is a business, it is also a profession. It really amazes me after teaching this for over 10 years that people still think they can just come into trading and will just start ripping off successful trades from reading a book.
Do you know when you get a bunch of new traders in a room and ask them if they think they will be successful all of them raise their hands. Well, "no kidding" you say, "why the heck would they be there if they didn't think they would be successful?" And that is a good point. But, I want you to realize that trading attracts some of the best minds from many fields, and almost all these people are competitive and think they have something special about themselves that will allow them to "beat" others and the markets. These people aren't stupid. Yet, 95% of them fail.
Why? Well let me put it like this to you... imagine a doctor trying to do surgery with a book of supposed principles of surgery that would work. Yes I said SUPPOSED principles of surgery. We all know this is not true, the principles they learn are far from being supposed, they work. Heck they better! Let's take it a step further, what if he was using a supposed book of theories with no actual practice! Uggh! You going to go to him?
I'll give you another example, imagine a pilot reading a book with some supposed working principles of flying and going off to begin flying? Sounds insane doesn't it? Well, why oh why is it any different in trading? IT ISN'T!
If you do this , I can guarantee you will lose! The fact is, in live trading theory melts away like snowflakes in the sun. You have to know what works, it must be tested and you MUST have real actual "screen time" or practice in the markets with a simulator.
In a way, this isn't too original... it what they do in any other industry when you want to learn to do something effectively. What we've done is apply this to trading! When you become a member with us think of yourself as in trading university and then on the job training.
7. Lack of Discipline to Follow the Plan
This is a huge one that almost no one ever tells you about... especially people who sell systems. I don't care how great a system is, if you don't have the mental discipline to follow it, it's completely useless. I know what you might be saying, "Well, who the heck wouldn't follow a successful system?" I'll tell you who... most people.
Especially when it starts to hit the inevitable drawdown or losing phase. Most people have a hard time dealing with this. They hit a string of losers, and they say "uncle." Then they move to another system and the process repeats until they either lose all their money or just give up. But that isn't the whole of it... the biggest by far, is the money management... many people find it very
hard to suffer a small loss and to cut losses. Even worse is when they don't cut a loss and it turns into a bigger loser. But, the absolute worst of all is when it turns back into a winner. What you say, "why would that be a bad thing?"
Well, the reason is because you are rewarded in the short term for bad behavior and you may grow accustomed to practicing it. You aren't obeying your stop losses to get out, and believe me, one day you will pay very dearly for this. That losing trade that turned into a winner today or tomorrow will turn into a huge loser one day. Actually, you may even end up losing your whole account or more! Take it from me, when your stop is hit, get out!
8. Failure to Control Emotions - Not being mentally prepared
Well, another one about you and your head. Yes our dreaded emotions. They can be beautiful to indulge in other areas of life, but not in trading. Many people who trade and suffer loses beat themselves up and some can even end up falling into a depression. Others think they are the "king of the hill" when they win and they can do no wrong. Here is something that is very important to remember, the market doesn't care about you, your family, your status, if you are a nice guy who helps old ladies across the road, your skin color, your age or anything else.
For this very reason, it has the ability to humble or enlighten you when you least expect it. What I'm trying to get through to you is do not become euphoric when you have a winning trade, and don't freak out on yourself when you lose. You have to remain indifferent. I know that isn't easy, but it's true, and you'll find out just how true it is when you begin trading.
There is an old saying in trading-- take your money, put it in your backyard, douse it in gasoline, and set it on fire. What this means is, number one, you shouldn't be using the kids milk money to trade, but secondly... you cannot be attached to the thought of losing it. Some of the worst traits are those individuals who have deep attachment to their money and on the other hand, those who really don't care about their money. The golden mean is the person right between these two.
To be effective at this... you should not be some sort of nut and go out "guns a' blazin" and trade everything that moves and not care if you lose your money. On the other hand, if you are so attached to your money to the point where you cannot stand to lose, you will not win either. Everytime you take that inevitable loss, or string of losses, it'll get to you. Think of this like a date you want to get with a special someone. You can't sit there and "just hope" something will happen, you have to take action. You cannot be afraid of losing and suffering the consequences of the person saying "no". You have to go for it.
A few other points here, you have to be willing to let go of control. In fact, you have to realize...you aren't in control of what happens in the market once you place your trade. Many people cannot deal with the feeling of not being able to control the direction of the market. If you are a perfectionist and love to be in "control" it may give you a strange feeling initially.
You will realize that the more you let go and just follow your trading plan and strategy (if it works) the better you will do. The more you try and control things and "think" your way through it, the worse you will do. You can still be a perfectionist, you just have to be a perfectionist in a different way: of ruthlessly following your trading plan.
9. Taking on too much risk
A huge one here. When many people first come into trading they take on way too much risk and place down huge trades with massive amounts of leverage. They get into the position of biting their nails on every trade and praying that they don't lose. This is not trading, it's suicide. You need to know how to effectively manage risk and place trades in a method that does not jeopardize your state of mind or your account.
You need to realize that trading is a probabilities game, and even if you do win big when taking on massive amounts of risk, you are just setting yourself up to lose big in the future if you continue with that behavior. Think of it much like Russian Roulette or tempting fate. In fact, in Nassim Taleb's book Fooled by Randomness he makes a nice comparison of two traders one taking on large amounts of risk and another not. They have to be viewed in multiple outcomes, or multiple probabilities of something
happening. Not on the actual outcomes. The one trader taking on large amounts of risk, if he wins, may be seen as some sort of trading genius because of all his winnings.
But, the fact is, he should be viewed in the light of a Russian Roulette player. What if we witnessed someone go through a game of Russian Roulette and make money for it, would we think he's a genius or a nutcase?
One of the worst things I see is when someone takes on too much risk and wipes out their preceding hard earned gains, then starts using even more high leverage, high risk methods to make it up. Even worse is when someone wipes out their whole account all together. How many traders that you see with huge gains in a short amount of time are walking around with a false sense of confidence? How many are just full of hubris and products of random chance? How many big shots could be tomorrows losers?
You need to place trades in a fashion that takes probabilities into consideration. This is so important I cannot stress it enough to you. Do not try to win the battle, your job is to win the end war by being tactical, consistent and methodical. You have to know what is realistic and what you and your system can accomplish. You have to know what could possibly turn out the worst and how bad it could be, and most importantly, you need the money management to protect yourself as much as possible so you stay in the game. All great traders know and follow this.
Not the crazy go for the end wall home-run way. I hope you plan on doing this for a while and actually making a living at it. If so, we're for you.
10. Not using stop losses
We touched on this briefly in point number 7 but I want to go further in depth with this, it's very important. Do you think you can predict what the market will do all the time with 100% certainty? If you do, I don't know how long that will last. But, if you are like most people you know this is impossible. So why do some people refuse to use stop losses? There are many reasons, some intellectual and some emotional. But it is still one of the worst mistakes in my opinion because the misfortunes that come about from not using them are preventable.
I just think it's perfect common sense to use stop losses. If you aren't familiar with a stop loss it is simply an order placed with a broker to sell when the price reaches a certain maximum loss point. In other words, setting a stop-loss order for .50 below the price you paid for a stock would limit your loss to .50 x the amount of shares you were holding.
One of the biggest reasons for not using stop losses is not being able to take a small loss. This will eventually turn into a big loss, and one day will empty your whole account. A big emotional reason for not using them is simply not being able to except the fact that you were wrong. This is actually human nature. We are told this from when we are young. Get out there and win and don't give up are two common sayings we have all heard in our lifetimes at least once.
But trading is a bit different, it's much closer to professional gambling then football or sports. (Many trading books won't tell you that!) It's about probabilities and having a tested system that is more right then wrong and having the discipline to follow it. It's funny, many traders even when they see on paper that their system has 3- 4 losses per 10 trades think "no big deal, I can sweat that out." But, once they begin trading they have a hard time dealing with this.
Why? I'm not sure, I guess it comes back to human nature, and what I was saying earlier in point number 8... we love to try and control and to be in control of things. I think it's also because it feels like a blow to the ego of some people if they take a loss, they may feel like they aren't a good trader.
There are also some traders out there that have promoted the the idea of not using stop losses for intellectual and sometimes what seems logical reasons. I've even seen some very intelligent people who are great traders use these ideas. But, I will also tell you, everyone of those great traders that I have seen or heard about have now at least once suffered a loss so bad they had to close down their account.
Many of these traders basically believed that their trading strategy and trades should be determined by the statistical probability of a massive loss alone. Now, although statistical inference is valid as a data point, when one uses it as their primary and sole validation of any trade premise, the risk exposed to is far too high. Basically the foundation of their theories were based on using prior statistical probabilities to validate a trade. In other words, if the odds of a trade blowing up in their face are 1 in 1000, then it would be a good trade. The problem with this method is rare events happen, and when they do... they often do considerable and sometimes unrecoverable damage. Lesson... always use stop losses.
11. Trading markets that have the odds stacked against you
Another one most people won't tell you. Why do we like Eminis? Here's some important reasons and they all stop the odds from being stacked against you:
First off, it's important to realize the benefit of trading an index or basket of stocks (like the Eminis) rather then an individual stock. It is much easier to know which way an index or the overall market will go rather then an individual stock. Most stocks are not tightly correlated to the movement of the overall market. If you thought the overall market would rise, your E-mini position would rise with the overall market. But there is no guarantee that an individual stock will rise. In fact, on good market days up to 50% of the stocks will not rise.
Next, if you have ever traded stocks, you know what happens after they have announced negative news. Sometimes they open at half their previous days closing price or even worse. This is a horrible experience when it occurs. Yes, Eminis gap higher or lower, but, not even close to the level of an individual stock. They have never gapped down to the extent that individual stocks do. AND most importantly, if you are trading the Traders International way, this will never happen to you anyway, because you will never be holding any positions overnight!
Another big bonus of trading Eminis is they have no market makers. This is so HUGE. In stocks and Forex there is a lot of market manipulation from market makers, you don't have to deal with this problem in Emini trading. An example of issues like this in stocks is when a brokerage firm increases their recommendations or when extremely good news comes out and your stock falls. One reason why this happens is because there are specialists or market makers involved in every stock, and with this comes
the possibility of manipulation.
You may see exactly the same trading setup in several stocks, but they can all react differently because of the way the specialist or market maker manipulates the stock. As for Forex, there isn't any regulation and oversight like there is with Eminis. The manipulation, especially with spreads in Forex trading is quite high.
This is not a problem with the E-minis. They often trade smoothly, and this makes their behavior much more predictable and easier to trade. It really is a level playing field, every trader is equal. It's first in/first out, and if you have a better bid/offer, you are executed. In effect, you are in a queue and are price matched. So, unlike Forex or stocks, it's completely transparent.
I could go on and on. Emini offers incredible leverage (that we teach you to use wisely) so you cans tart with a smaller account, large profits per point moves and large amounts of liquidity so you can get in and out of your positions fast. They really are ideal for short term trading, that's why they are the best.
12. Having unrealistic expectations
I mentioned earlier how 95% of people when they come into trading think they are going to succeed, and even worse... some of them think they are going to make a cool million in no time flat. It doesn't help that there are trading books out there promoting how someone turned $2000 or $10 000 into $1 000 000 in a very short period of time. This is not a healthy outlook to have. Here's why... those are unique cases if they are true at all.
Also, if you don't meet these expectations you may feel like you have failed or there is something wrong with you. But, even worse, you will end up doing absolutely crazy things to try and achieve it, which gets back to point number 9 of taking on too much risk. Heck, some of those success stories could have been the Russian roulette players of the markets that just happened to make it through by chance.
You would be surprised how often I've seen people that are doing well making $100 or $200 a day using proper leverage and risk management with a smaller account sabotage themselves by trying to become one of the "big boys" to soon. Once again, please re-read point number 9. Let me make this very clear to you, trading is not easy. We use a very, very simple method we know works because we test it.
In fact, The idea is to always have something new coming into the trading rooms so we can always update our trading methodology if the market dynamics change. But there is a difference between a simple method and something being easy.
Most of the hard parts of trading are psychological and this is where mentoring really becomes a blessing. That being said, every point in this report is a crucial part of the puzzle... the system, the psychology, the money management, the practice and experience and the mentoring. One isn't more important then the other. Think of all of them as foundations holding up a building.
13. Lack of support- mentorship
And last but certainly not least, support and mentorship. The absolute fastest way for you to learn in any endeavor is for you to get a mentor or coach. In fact, think how many successful people do this in many areas of life. You need guidance, you need support, you need people to walk you through and help you when the times get rough. These people must be pros that have experience and who actually walk the walk.
The value of this is almost priceless. Once you have a trading system and methodology, getting a mentor gives you the ability to take that leap of initial fear to a position of confidence. You are surrounded by success, you have people trading right along side with you, and right in front of you. There is no quicker way to get the trading concepts down into your natural behavior and make you realize that the learning curve is working with you.
When you stumble or when you have questions, they are there for you. Not just anybody, but real people who actually trade their own money and can help you do the same. People that have been at the same level and have experienced the same problems that you are facing.
