Your job as a trader is to take on risk and avoid uncertainty.As a trader, you need to focus on calculating how much you can win or loss and the probabilities of each outcome.
After intense studying and analysis, you might get an idea of what might happen and their chances. You can then choose to proceed if the odds favor you.
Commom mode failure is a trader having consecutive losses. A streak of losses damages your confidence and makes you doubt your trading strategy. It can also cause overtrading as you try to make back the losses. These effects will speed up your market demise.
Traders are far too confident. There are more unknowns than we think, and we need to be aware of them.
Many traders choose to focus on what they know. For instance, they see a perfect chart pattern, and they want to trade it. They know that it’s a fantastic trade setup. They know that the volume is supporting their strategy. They know that they have a good reward-to-risk ratio.They know everything. Hence, these traders take the trade.But they should have factored in what they don’t know. For instance, an important upcoming economic announcement. The response of the market to that announcement is an unknown, at least to a technical trader.If more attention is given to this unknown, they might go for a more sensible decision. They might decide to delay their trade entry or skip the trade altogether.This mindset of respecting the unknowns relates to a trader’s ego. You need to put down your ego and recognize that there are things you don’t know.
The safer we feel, the more danger we are in. having more money in our trading account reduces risk. It makes us feel safe.But exactly because we feel safe, we start to relax our trading rules to take subpar trades. We ignore our position sizing models and overtrade.