It is estimated that more than 90% of traders end up losing money, even though most have some minimum guidelines for taking trades.
This is because the key is not in having rules, but in having the correct discipline to be able to comply with them. The reasons why they end up losing can be many, but the most common are:
🛑 Lack of discipline: The main element of your trading plan is not just in the rules but in having the discipline to follow them. If you commit to executing your plan and have the discipline to stick to it, your results will become increasingly consistent.
🔄 Overtrading: Having a trading plan without a clear and realistic goal can lead you to trade more frequently to try to achieve “the highest possible profit.” Instead of pursuing profits, you should pursue consistency.
❓ Not having a clear strategy: Not knowing exactly why you are opening a trade is a symptom that your strategy is not well-defined. If this happens to you, the best thing you can do is stop trading and work on the entry and exit points of your strategy.
⚠️ Not knowing how to manage risk: Problems arising from a lack of risk management stem from fear or recklessness. Many inexperienced traders refuse to follow risk management rules and open trades that are too large, consequently losing too much money.