“It’s not that they can’t see the solution. They can’t see the problem.” – G.K. Chesterton After browsing through the most popular trading forums, 4 questions appeared over and over again and regardless of whether it was a forum for forex traders, stocks, futures or even Quora.com, people asked these 4 questions repeatedly and often they were asked multiple times per day. Let’s take a look at them, what the idea behind them really is and why asking such questions never lead to better trading.
Today’s topic addresses a very common problem in trading and a major reason why traders don’t see the results they are hoping for. The questions we ask ourselves lead to actions that we believe will bring us closer to the goals we are having. However, most people ask the wrong questions, which then lead to actions that don’t necessarily help them achieve their goals and may even be damaging to what they are trying to accomplish. In the following, we take a look at how traders attack their problems and which alternatives could help them improve much faster.The 4 questions asked by amateur traders
#1 Should I trade without a stop loss?
Without a doubt, this is the most commonly asked questions across all forums that we analyzed – and it’s a very dangerous one. When people start trading without a stop for the wrong reasons, disaster is going to happen. After reading a few dozen of these questions, the rationale behind the question was always that trading without a stop loss provides more flexibility to react to sudden market moves and to stay in trades longer because, eventually, price will turn around and they could potentially avoid realizing a loss if they had just waited longer.
This is so wrong on so many different levels, but asking such a question will never lead to better trading. Realizing a loss and moving on to the next trade is essential and if traders cannot deal with losing trades, there is no room for them in trading, and the market will show them that this holds true. A stop loss is among the most important tools that a trader has and by not using a stop loss and not knowing how to deal with a loss, you will not become a better trader. Promise!
Better questions to ask:
- Am I placing my stop loss orders at price levels that are too obvious? (read rule #4 from market Wizard Marty Schwartz)
- What do my losing trades have in common? How can I correct that?
- What would be a better stop loss approach? Let me try some alternatives and evaluate their performance.
- Should I enter later because I often see price going against me?
#2 Is trading rigged?
This ties in with the previous question. Amateur traders often believe that their broker is trading against them or that prices are being manipulated to their disadvantage. First, you should choose a broker that is trustworthy, well regulated and has a good reputation. If you adhere to this tip, you can stop worrying about manipulation and start focusing on trading.
But secondly, and more important, such a question puts you in a victim-mindset and traders give away the responsibility for their own actions. Now, whenever they are taken out by a few points, they will start blaming their broker or other outside circ*mstances. As a trader, you are always completely responsible for whatever happens to you. If you are looking for excuses, you will miss many great learning opportunities because you believe that you have done everything correct and that somebody/something else is to blame.
Better questions to ask:
- Should I set my stop loss orders a bit further away so that I don’t get taken out by a few points?
- What do my losing and my winning trades have in common? How can I do more of what works and improve on what doesn’t?
- Which are the mistakes I most commonly make and what drives my decisions?
- Why am I so often closing my winning trades too early? How can I make sure to let them run further?
- How can I stop widening my stop loss orders or adding to losers, since I know it always results in bigger losses.
#3 How can I become a millionaire?
Surprisingly, this question only ranked #3 and not higher. The majority of traders starts with hopes and big dreams about how much money they can make in trading. This is the results-oriented mindset that we have talked so often before and wondering how to become rich in trading will NEVER get you to where you want to be. Traders who ask such questions are always looking for better indicators, more accurate entry methods and other ways to make a lot of money in a short time and do not accept the fact that trading is just like any other profession where effort, discipline and continuity determine whether you will make it or not. Research even found out that traders who have this gambling-mindset are more likely to lose money in trading. Don’t daydream about all the possibilities that are still far away, but always focus on the ‘now’ and how to be the best trader that you can be today.
Better questions to ask:
- How can I make small improvements week after week? What do I have to focus on today?
- What are the weak spots of my trading strategy?
- Where is the most room for improvement?
- Does my attitude towards trading reflect my goals? Am I showing a professional attitude?
- Do I have the get-rich-quick mindset? How is it influencing my trading? How can I become a more long-term oriented trader?
- Am I disciplined enough? Do I create a trading plan and keep a trading journal?
#4 How can I stop having losing trades?
Nobody likes to lose and be wrong. Especially amateur traders get their egos in the way and assume that realizing a losing trade is a sign of weakness or failure, whereby, losing is an essential part of trading and dealing with losses is important. Traders who are always looking to increase their winrate and avoid losing trades, will never stop “system-hopping” and will continue to go from system to system without ever experiencing a learning effect. Such traders misinterpret their lack of development as the trading system’s flaw of providing good entry signal. Needless to say that those traders are forever caught in the vicious trader-cycle of system-hopping and the hunt for the Holy Grail.
Better questions to ask:
- Am I correctly executing my trades? Do I act according to my trading strategy and my trading plan?
- Am I making impulsive and emotionally driven trading mistakes?
- Should I really change to another system? Have I put enough work and effort into my current one or am I just looking for an easy way out?
- Has changing my trading strategy ever helped improve my trading before?
- Is it time to focus on one approach and trying to make it work?
As you can see, asking the wrong questions will inevitably lead to the wrong answers and actions. A trader could learn so much by listening to the general crowd in trading forums or social media and use these clues as ideas what not to do. We suggest that you carefully observe your thoughts and your questions so that you can avoid making wrong assumptions about your path as a trader.
“What people think of as the moment of discovery is really the discovery of the question.” – Jonas Salk
