Here's Why You're Not Making Profitable Trades

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Here’s the hard cold truth:

Only 5% - 10% of traders make money.

The rest?

They make the same mistakes and lose money because of it.

I’ve spent over 3,500 hours just talking about trading stocks with some of the most skilled traders in the game.

They all agree 90% of traders lose money because of these 8 mistakes:

1. Not Using Stop-loss Orders

Stop loss orders will limit your losses during adverse market conditions.

Their benefits outweigh the risks of not using them.

I’d rather have a few trades sell too early than be trapped with losses hoping for the market to turn around.

I’m not in the game of waiting to break even.

I cut losses ruthlessly.

The worst thing you can do is cancel a stop loss order if you think a trend will reverse or straight up neglect them entirely.

2. Spreading Themselves Thin

Riches are in the niches.

Don’t have 30 different positions open.

That’s too much to keep an eye on. You’ll never be able to keep up.

Instead, stick to 5-10 positions.

When you spread yourself too thin across different positions you prevent yourself from completely understanding one of them.

Put all your eggs in one basket — and watch that basket.

Andrew Carnegie

3. Inexperience

Trading is more than buying and selling stocks over a short period of time.

You still have to deal with:

  • Risk

  • Stress

  • Capital

  • Software

  • Order Fulfillment

If you’re lacking in any of these areas your chances of losing money will increase exponentially.

4. Herd Mentality

This is when stocks that are popular or have momentum.

This can lead you to buy stocks that have already run up or short stocks that have already bottomed out.

Profitable traders exit positions when they get crowded.

Crowds are not signs of conviction.

They’re signs of bubbles.

5. Overconfidence

Don’t let 1 profitable trade dictate the amount of risk you take on during the next one.

Beginners’ luck doesn’t mean trading is easy.

Your strategy should stay consistent throughout.

Find a strategy that works for you, get really good at it, then assess your risk tolerance.

Your risk tolerance is directly correlated with your skill.

And 1 profitable trade doesn’t make you skillful.

6. Not Doing Homework

Speed is the name of the day trading game.

You won’t have enough time to thoroughly research every potential trade.

This doesn’t mean you should ignore research and trade blindly.

It means only trade what you thoroughly researched.

If you struggle with narrowing down your open positions, this strategy will make it easy.

7. No Trading Plan

A trading plan means you know your:

  • Capital allocated

  • Maximum loss

  • Entry points

  • Exit points

“Buy low, sell high” is not a trading strategy.

If that’s your strategy, you’ll end up buying low and selling lower.

8. Position Sizing

Position sizing is when you know how much of your portfolio a trade takes up.

You can base this on how much money you’re going to use or how many units you’re going to buy.

A good rule of thumb is to risk no more than 2% of your account on a trade.

Anything more and you start taking on more risk than is necessary.

There you have it.

8 of the most common mistakes traders make that are costing them profitable trades.

What are some mistakes you’ve made?

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