Why do beginner traders lose? Well, one of the things that I noticed about top traders when I was studying them is that they decide conclusively what their system is and they stick to it no matter what.
Do what the expert traders do
Some top traders only trade one particular setup. This setup gives them an edge over the market and it repeats time and again. They see their setup and they take their trades. Sometimes their setup will lose and more times it will win. This is how they play their edge and how they make money.
They have rules for their setups that are well defined. It is clear to them when their setup is in play and when it is not. They develop a certainty around their process and they do not deviate from it.
This tends to differ hugely from the way beginner traders trade. Beginners tend to decide loosely on a process. They have their process in mind when they are watching their charts and they look out for what they think may fit their process. The market behaves in a certain way that makes them believe that it will go in one direction or another and they think “the market is going down.” Or “the market is going up.” They take their trade.
Maybe the setup fit their process or maybe it didn’t. If they win on the trade then they gain confidence. If they lose then they start questioning their process.
Either way they continue watching their charts with their previously defined process in the back of their mind.
If they have confidence then they may see a similar signal or get a similar feeling that they know what is going to happen next. They take their trade and it wins or loses. Again if it wins then their confidence grows. They start feeling like they know what they are doing.
If they lose on consecutive trades and they followed what they think was their process then they will seriously start to question their process. Maybe they will consider tweaking it a bit or changing it altogether. They may even decide to do the opposite to their process to see if that works instead! Either way their process normally hits the dust and their losses compound.
The hugely confident beginner trader can be a danger to themselves. Over confidence and a feeling of invincibility will probably lead to them losing sight of their process. They may start taking random trades. Eventually losses will start accumulating.
At the end of the trading day it is not unusual for a beginner to have forgotten completely what the process was that they started using at the beginning of the day.
Somewhere down the line. It may be after one or two trades, or it may be after five or six trades their process has been distorted and sometimes deleted.
Overnight or the next morning a beginner may go back to square one. Decide on their process, start watching their charts. The process begins again.
Why do beginner traders lose? Stick to your process
Top traders never deviate from their process. No matter what the market does or how their trading goes for the day their process remains the same. They will have maximum loss limits within their process that leads them to call it a day when they are losing. They may have well defined time limits for how long they spend trading every day and when they reach this time limit then they will go and do something else for the rest of the day. They will also have profit targets which once achieved will lead to them reducing their position size or trigger a break from trading.
Their process is a series of if..then statements. “The market has done that and so if the market then does this I will enter a trade. When I am in the trade if the market reaches such and such a point then I will exit for my profit. If it does the other then I will exit for a loss. If I reach my maximum loss of XXXX then I will stop trading for the day.” And so on. Clearly defined actions and a well defined system. A profit making process.
The process is key to success in trading. Knowing the process intimately and sticking to the process is vital. This is one way that top traders are able to manage their emotions and accumulate profits. I build all of these things into my own trading process and put it into practice. It works and it is what I teach people on my trading courses and how I coach traders learning to be successful.
Beginner traders need to think and behave like experts. This takes a little time and practice to achieve. Visual rehearsal can help. Getting the right education in trading is essential to building a profitable system and process that can be traded reliably.