Making too many trades is one of the most common (and destructive) mistakes traders make.
Given the complexity of option trading, you might think it would be a more common mistake to misread charting patterns or forget to check for stochastic shocks. But it's not. The biggest mistake is trading too much.
Why is this? I can't say for sure, but I have a theory...
Most traders hold onto wrong ideas about money because of how they were raised. They think making money must always involve hard work. They have a hard time believing it could be easy.
Unfortunately, this causes a lot of traders to "work hard" when they trade. And hard work almost always means trading too frequently.
Trading frequently wouldn't be such a problem except it often means taking a lot of sub-optimal trades.
Traders who "work hard" at trading ultimately find themselves in a lot of bad trades. Rather than wait for an ideal set-up, they get into trades almost daily, no matter how good or bad they are.
This kind of compulsive trading is really counterproductive. Worst case, you wind up with big losses. Best case, your profits are substantially reduced.
Example: Jack R. made 41 trades in Sep 2007. If you do the math, that's more than one trade a day. Now, Jack made a profit, but barely.
Then October came and his wife literally forced him to take an extended vacation. So he packed up his Cadillac SUV to drive around the country for a while and do some sight-seeing with his wife.
Naturally, Jack took his laptop computer to do some trading while he was on the road. Trouble was, his Internet connection was spotty. He couldn't always connect.
Because he couldn't connect to the Internet most of the day, Jack only made 26 trades in October. These trades were better planned and better executed.
Now, get this. Even though Jack "worked" nearly half as much in October, his profits more than doubled in one month's time!
Here's the lesson...
Trading doesn't involve a bunch of hard work. And if you believe it does, you might be walking away with far less profit than is possible.
So practice being a lazy trader instead.
Wait for the right set-ups before putting your hard-earned money into the market. Make a few excellent trades instead of a bunch of average trades.
Never compromise on your trading rules to make yourself feel like a "hard worker." Just practice patience and wait for the right set-ups. This is the way to wealth, and why you should value laziness as a trader.
Given the complexity of option trading, you might think it would be a more common mistake to misread charting patterns or forget to check for stochastic shocks. But it's not. The biggest mistake is trading too much.
Why is this? I can't say for sure, but I have a theory...
Most traders hold onto wrong ideas about money because of how they were raised. They think making money must always involve hard work. They have a hard time believing it could be easy.
Unfortunately, this causes a lot of traders to "work hard" when they trade. And hard work almost always means trading too frequently.
Trading frequently wouldn't be such a problem except it often means taking a lot of sub-optimal trades.
Traders who "work hard" at trading ultimately find themselves in a lot of bad trades. Rather than wait for an ideal set-up, they get into trades almost daily, no matter how good or bad they are.
This kind of compulsive trading is really counterproductive. Worst case, you wind up with big losses. Best case, your profits are substantially reduced.
Example: Jack R. made 41 trades in Sep 2007. If you do the math, that's more than one trade a day. Now, Jack made a profit, but barely.
Then October came and his wife literally forced him to take an extended vacation. So he packed up his Cadillac SUV to drive around the country for a while and do some sight-seeing with his wife.
Naturally, Jack took his laptop computer to do some trading while he was on the road. Trouble was, his Internet connection was spotty. He couldn't always connect.
Because he couldn't connect to the Internet most of the day, Jack only made 26 trades in October. These trades were better planned and better executed.
Now, get this. Even though Jack "worked" nearly half as much in October, his profits more than doubled in one month's time!
Here's the lesson...
Trading doesn't involve a bunch of hard work. And if you believe it does, you might be walking away with far less profit than is possible.
So practice being a lazy trader instead.
Wait for the right set-ups before putting your hard-earned money into the market. Make a few excellent trades instead of a bunch of average trades.
Never compromise on your trading rules to make yourself feel like a "hard worker." Just practice patience and wait for the right set-ups. This is the way to wealth, and why you should value laziness as a trader.
About the Author:
Warning: Option trading involves risk. Which is why you need continuing education, state-of-the-art tools, and accountability. Visit A.J.'s blog for free option trading education. Better yet, sign-up for the best option trading membership on the market today.
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