If you want to become a much more profitable trader, you will benefit immensely from the following information. If you manage to eliminate all of these mistakes, you will be a long-term profitable trader guaranteed.

1. Not using a stop-loss

If you don't use a stop-loss you risk 100% of your account to potentially win a little bit of money. If you use stop-losses then you only risk a little bit of your investment to win a little bit of money. Not only is using stop-losses the absolute only way to become a winning trader, it also gives you potentially a lot more trade opportunities in the same period of time. Always avoid the possibility that you have to be in a trade for weeks, months or even years when you could have gotten away from it in the beginning and easily made back your losses during that time without all the stress of being stuck in a losing trade forever.

The farther away your stop is from your entry point, the higher the probability that your trade will win money and the smaller your potential gains are. So if you aren't using a stop-loss, you have a very high probability of a profitable trade (although it could take an extremely long time), but when you finally have a losing trade, you lose 100% of your money. Not using a stop-loss is exactly as playing roulette, you can delay going broke for a while, but when the bad luck finally hits, you will go broke.

2. Overtrading

Overtrading can be simply explained as being too impatient. The only way to make money in the market is to wait for profitable opportunities. Nobody can make money with trading every hour of every day. Relentless patience and discipline are required to be a profitable trader.

3. Trading too small timeframes

The reason this loses you money is because you have a smaller sample size. The smaller the sample size, the smaller the accuracy. To become a profitable trader it's best to not look at price data more than once a day (1D or daily timeframe in charting software). Intra-day data is considered market noise.

4. Insufficient profit taking

This might sound counter-intuitive, but not taking profit could actually lose you money. A simple example is: if you risk X and win money approximately 50% of the time in similar trades, you need to win more than X on average in your winning trades to make a long-term profit. So if you risked $1 (you would lose $1 if your stop-loss would hit) and you are finally at $1.10 profit but you think it will go much higher and decide to not take profit and find the next time you look at the price that you are now only $0.90 in profit, you are actually in a losing long-term trade, because you risked $1 to win $0.90. Entry points, exit points and stop-losses all influence your expected value.

5. Market revenge

Market revenge means you trying to regain your losses (including loss of profit). This could either mean you enter into a trade at a less ideal or outright losing opportunity, or you increase the size of your investment during the next trade(s). This will almost always result in losing almost 100% of your investment.

6. Greed

Greed will result in bad risk management. If your style of trading requires you to risk 2% of your total investment per trade based on the Kelly criterion, then getting greedy and increasing it will almost always result in losing almost 100% of your investment. No matter your situation (bad mood, not enough sleep and so on) or how much losing trades you have had in a row, you should NEVER increase the investment you agreed to.

7. Fear of missing out

Fear of missing out (or FOMO) means that you enter into a trade late during a strong trending move which is a less profitable trade or many times even a losing trade, because trends can't go on forever. People will eventually run out of energy to push the price a certain direction. The longer a trending move has been going, the more likely that is going to end soon. Think of it as taking a sprint, eventually you will have to rest.

8. Counter-trading

Counter-trading is short for counter-trend trading, which simply means trading against the "main" trend. If a financial instrument has been going down for a while you might think it's time to buy because it's running out of steam. This is a counter-trend trade and is a lower probability trade than a trade that goes WITH the trend. Think of it as rowing against the stream, which requires much more energy than rowing with the stream.

So in short: if the trend is down and you are waiting for a buy opportunity, wait for the power of the bears to decrease. You can spot that a trend is likely running out of steam when you notice the distance between highs (in an uptrend) or lows (in a downtrend) is decreasing or even 2 or more highs or lows are at near identical prices. Common reversal patterns are head and shoulders and double-top patterns.

9. Using (technical) indicators incorrectly

This is an extremely common problem. Many beginning traders have absolutely no idea what indicators actually do, let alone the math behind it. If you don't know exactly what an indicator does, do NOT use it! In fact, even if you do know what the indicator does exactly, you still can't use it to make profitable long-term decisions. The only way to make long-term profitable decisions is by using more than 1 indicator in conjunction, if you know exactly how they work and what they represent.

Closing arguments

If you recognize any (or all) of these mistakes and/or have no idea what many of these terms or concepts mean, then you're very likely a long-term losing trader. Trading is easy in theory, but in practise about 95% of traders lose money long-term. The best way to improve is to plan your trades ahead of time and once you pull the trigger, stay emotionally detatched from the outcome. When you executed everything according to your plan, the rest is out of your control. If you get emotional from trade results, you either are risking way too much money per trade or you need to resolve other (emotional) problems in your life first.

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