Why Do Traders Make Mistake "lack of trading plan"? 

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Why Do Traders Make Mistake "lack of trading plan"?

The answer to the question "why do traders make this mistake" could probably apply to all of the mistakes on our site. The primary cause of this mistake is simply the lure of easy money. The underlying thought seems to be "why bother wasting a lot of time planning; why not start getting rich right away?" This is understandable. There is probably not a soul on this earth who works for a living who has never once dreamed of making some huge sum of money quickly and easily and then living a life of spoiled luxury from that day forward. And the fact of the matter is that futures trading offers just that possibility (which is exactly what makes futures trading so alluring, yet so dangerous).

Consider these success stories:

  • In a trading contest in 1987, Larry Williams ran $10,000 up to $1.1 million dollars in less than a year.
  • Michael Marcus started with a trading account of $30,000 and over a period of years garnered over $80 million in profits.
  • Richard Dennis became a legendary trader in the grain pits in Chicago in the 1970's. Starting with a reported $400, Dennis ran it up to over $200 million dollars (his father is reported to have made one of the greatest understatements of all time when he said, "Richie did a pretty good job of running up that $400 bucks").

Let's face it; these numbers are staggering. Who in their right mind wouldn't want to achieve the kind of success that these individuals have? Unfortunately, most individuals tend to focus not on the "achieving" part of the process, but rather the "post-achievement" period. In other words, if you asked the question "could you imagine having this much success trading futures," most people would not begin mentally drawing up plans as to how they would trade soybeans. Quite the opposite. Most people would start drawing up a mental laundry list of all the things they could do with the money. The "doing" part is not nearly as sexy as the "done" part.

What is missed in this kind of thinking is the reality of the situation. Like all top professionals in any business, successful traders, including the aforementioned individuals, are not lucky. They made mistakes, they paid for their mistakes, they learned from their mistakes, they learned what was required in order to succeed, and they did those things no matter how difficult they were.

  • In 1973 Larry Williams published a book titled "How I Made One Million Dollars Last Year Trading Commodities" detailing his trading success that year. The next year he lost the million dollars.
  • Michael Marcus started with $30,000, borrowed another $20,000 from his mother and then proceeded to lose 84% of their combined capital (imagine trying explain that to your Mom) before becoming a successful trader.
  • In 1987 several commodity funds managed byRichard Dennis lost 50% of their capital and were forced to stop trading. The moral of the store is even the most successful traders suffer tremendously from time to time. You will too. The real question is "how will you react?"

One of the greatest dangers in futures trading is the danger of high expectations. By focusing optimistically on how much money he or she is going to make, a trader can easily overlook the more important task of planning out how to deal with all of the bad things that he or she will inevitably experience. If you are walking down the street and you trip and fall that is one thing. But, if you are standing on a mountaintop and you trip and fall that is something entirely different. And if you aren't even aware that you are standing on a mountaintop and you trip and fall, then the only words that apply are "look out below!" Traders who focus too much attention on how much money they might make run a very high risk of a frightening slide down a steep slope.

The Recipe For Trading Success that Nobody Wants to Hear

As with any other endeavor, successful futures trading requires a great deal of hard work. There is hard work involved in planning and there is hard work involved in following the plan. In the case of futures trading "hard work" more often takes the form of making and following through on difficult decisions, rather than on any type of actual physical chore. If you hope to be a successful trader you must be prepared to pay the price. The first step begins with developing a well thought out trading plan that covers all of the key elements involved.

Categories in Trading Mistakes

Lack of Trading Plan
Planning plays a key role in the success or failure of any endeavor

Using too much Leverage
Determining the proper capital requirements for trading is a difficult task

Failure to control Risk
Refusing to employ effective risk control measures can ensure your long-term failure

Lack of Discipline
A lack of discipline can destroy even the most talented and best prepared trader

Useful Advices to Beginning Trader
You can control your success or failure

All about Stocks
Encyclopedia about Stocks. That you should know about Stocks before starting

Forex Glossary
All terms about Forex market

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