Ruth Barrons Roosevelt, writer of Overcoming 7 Deadly Sins of Trading, says there are certain obstacles or “sin” traders must avoid to be successful.
This article will take a look at these sins – how they play into trading and how avoiding them can help you achieve your investment goals.
1 Being a Perfectionist
Markets aren’t perfect, they are affected and influenced by a multitude of variables – and as a product or maybe more appropriately in response to markets – trading systems or strategies will not be perfect. Expecting or striving for every single trade to be profitable can be catastrophic, both to your investments but also to your psychology as a trader.
Ultimately consistency is likely a much more valuable asset to have as an investor.
2 Trader’s Fear
The markets move constantly – inevitably there will be downs along with the ups. Being weighed down fear, by not opening position or by exiting a position too soon, can cause you to diverge from you trading strategy and hold you back from your achieving your investing goals.
3 Trader’s Pride
As the stereotype goes, traders are cocky. Pride and insufferable confidence has been the domain of financial market traders – but being too confident can be disastrous. Basing a trade on intuition, or gut feeling instead of data both fundamental or technical can be an unforgivable “sin”.
4 Patience is a Virtue, Impatience is a Sin
This almost parallels fear, because when you are seeing the instrument you are trading slowly inch up, you might start getting antsy. If you have a predefined strategy though, adhering to it could spell the difference between achieving your goals or not.
If you explore enough traders’ forums then you will inevitably come across a slew of warnings against greed. Greed is not only a cardinal sin but it also happens to be a trading sin.
This can cause you to risk a larger investment, use leverage recklessly and hold on to a position longer than you should.
We’ve all seen the viral video of the guy smashing his keyboard over his screen, and the guy throwing his screen across the room…and the guy throwing his computer out the window. Here’s my question to you – do you think that those guys could’ve made a calculated decision during their tantrums? If they could they wouldn’t have destroyed hundreds of dollars’ worth of computer equipment. Being calm not only allows you to make better more calculated decisions, but it will also allow you to pivot and adjust when necessary.
This is the downfall of many a new trader. They think that they can put on a snazzy suit, sit in front of a computer and become traders. Without having a strategy or predefined goals to strive towards, then you won’t think about the steps and process you need to follow.
This can be a catastrophic “sin” and cause a significant loss of your trades and assets.
Now that you have been absolved (or at least made aware) of your trading sins, go forth and try to adhere to this traders’ code of conduct. Feel free to find any other rule and them on this list.