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The Major Categories Of Trading Mistakes


There’s a ton of advice out there about the mistakes traders make and how to avoid them. But here’s the thing: not all mistakes are the same. Placing them all in one same bucket leads to unnecessary self-blame and negativity.

In Article, I want to change that perspective. I’ll show you that your trading mistakes don’t carry the same weight, and you shouldn’t treat them as if they do. By placing them in their own category, you can organize your thoughts, be more positive about your progress, and forgive yourself for the mistake.

After years of trading, I’ve identified five main categories of mistakes. Each category requires a unique approach for resolution. Let’s dive in!

Sloppy Mistakes

These mistakes happen when we get distracted or lose focus. External factors like noise or interruptions, as well as internal factors like fatigue or multitasking, contribute to these errors. These are the mistakes you make when you forget to check the news calendar, look at multiple screens managing multiple trades at a time or go against your higher timeframe bias without realizing it.
When you lack focus, your brain cannot access your knowledge, for more extensive it is. Sloppy mistakes happen because there’s something at fault in your basic needs which leads to unregulated levels of dopamine – lack of sleep, unhealthy food, sedentary lifestyle, lack of social connection, mental health struggles, and limited exposure to sunlight.
The lack of sleep is a big one and highly underestimated. Studies have shown that lack of sleep disrupts our connection with intuition impeding access to the pre-frontal cortex – the part of the brain responsible for decision-making, predicting consequences, and logical thinking. When we lack sleep, our brain tends to rely on fast, readily available resources: our instinctive or primal brain. This part of the brain is designed for survival instincts and can trigger fear and stress responses unnecessarily. It can cause us to perceive threats where there are none, like a trading loss, or a missed opportunity.
Your basic needs form the foundation of the mental edge pyramid. Make sure to keep them in check.

Self-Sabotaging Mistakes

These mistakes stem from traders’ subconscious beliefs that interfere with the decision-making process. They can manifest in various ways like self-doubt and lack of confidence in one’s abilities, fear of taking risks, anger after a loss, etc…
We all have beliefs that may not align with our goals. Once we identify these limiting beliefs, we are faced with a choice. We can either work to replace them or change our goals.
Self-sabotaging mistakes have a place in the second layer of the mental edge pyramid. They have become deeply ingrained in our thought patterns, and unless we fix them, the trading mistakes that stem from these beliefs will persist.

Habit Mistakes

Habit mistakes happen when traders repeatedly make errors due to ingrained bad habits. These habits come from incorrect knowledge or flawed strategies that become reinforced over time. Sometimes, even if the approach is wrong, traders may have winning trades that reinforce these bad habits.
For example, imagine a beginner trader who initially learns incorrect ideas and starts trading based on them. Later, they realize their approach is flawed and begin working on a new strategy. However, their old habits are deeply ingrained and lead them to make mistakes in the new approach.
Another example is the trader who had a big win by risking 50% of the account, and now had the tendency to oversize on every trade. This behavior already led to big losses but the trader’s strong memory of their previous success keeps driving him to oversize trades.
Habit mistakes fall into the third category. They occur when repeated actions become automatic due to consistent reinforcement.

Adaptation Mistakes

Adaptation mistakes occur when traders stick strictly to their strategies or rules, despite the need for adjustments based on new knowledge or changing market conditions. These mistakes can manifest when traders fail to recognize potential opportunities or risks that fall outside their predefined rules. It involves a lack of flexibility in adapting.
For example, a trader might have a profit-taking rule that is conservative and it has been working so far. However, when the market conditions change, and there’s a strong indication of further potential profits, sticking to the existing exit method will result in leaving profit on the table. The trader must recognize the potential for further profits and adapt his exit method in a way that allows him to catch more of the move.
Recognizing adaptation mistakes requires humbleness, an open mind, and lots of journaling and analysis. Traders should regularly review their trades to access the big picture and notice a possible adjustment in rules.
The adaptation mistakes come in the 4th layer of the mental edge pyramid as these are difficult to identify and require more skin in the game. The beginner is many times too focused on respecting the strategy, the more experienced trader identifies the need for adaptation easier because he already went through different market conditions.

Unavoidable Mistakes

These are mistakes that traders make when encountering new situations for the first time. They are similar to the adaptation mistakes although these can happen inside one’s strategy without the need to adapt.
The market is always changing and our setups are never the same, our performance must involve and it’s normal that, after solving a lawyer of mistakes, you might face a new one that you need to approach.
These mistakes are opportunities to develop action plans for the next time you encounter the same situation. The first time you make a mistake is crucial and it requires awareness. Without awareness, the initial mistake can become a recurring one.
These mistakes make up the final segment of the mental edge pyramid, meaning, you’ll keep on making them and there’s no need to beat yourself up.

Final Words

Although we try to avoid them, mistakes are an inherent part of our trading career. Not all mistakes carry the same weight, each category requires a different approach for resolution. Categorizing them helps you better address them.
Lastly, stop pursuing 100% performance accuracy. This is a goal to aim for but an unrealistic one. The market keeps on changing and this is a performance skill, which means there’s no patamar. You’ll keep on making mistakes, and you’ll keep on defining plans of action to solve them. Over time, you will improve your ability to recognize the early signs of these mistakes and reduce their impact on your trading results.
This week’s action plan:
This week, take the time to review your trading journals and identify the five categories of mistakes. If you’re already recording your mistakes for each trade, simply label each mistake with the corresponding category. Once you’ve categorized your mistakes, dive into each group of trades and come up with three potential options to improve your behavior next time.
With love,

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