Learning to Deal with Key Trading Mistakes
In this video, Roger Hawes, an analyst at The Corellian Academy, discusses how to deal with key trading mistakes.
According to Hawes, mistakes in trading are inevitable, and traders, even successful ones, must be honest with themselves when they make them. Hawes also mentions that 80% of trading is psychological (resulting from emotions) while 20% is methodical.
As such, to become a better trader, it is crucial to acknowledge and understand mistakes.
To explain this, Hawes introduces the several common trading fears which include fear of losing, fear of missing out (FOMO), and fear of leaving money on the table. In addition, a number of emotional reactions to losses are discussed, such as chasing trades to recover losses.
Knowing these and learning how to control them is important because psychological factors can lead to errors, such as inexperienced traders taking profits too early and letting losses run too long.
To better control emotions, Hawes introduces a process wheel as a foundation for effective trading, encompassing continuous reading and research, risk management, order execution, and trade evaluation. The process wheel serves as a structured approach to help traders navigate and learn from their mistakes.
In conclusion, traders may want to develop a structured methodology, understand the psychological aspects of trading, and learn from their mistakes constantly in order to build a solid foundation. Continuous learning, risk management, and trade evaluation are guided by the concept of a process wheel.
