Learn trade planning & avoid these mistakes!

First the bad news: best estimates suggest that 90% of individuals who trade derivatives lose money doing so. Now for the worse news: This estimate may be too low. The sad fact is that somewhere along the way the majority of traders make one or more critical mistakes in their trading, which cause their losses to exceed their winnings.

The good news is that the mistakes that cause most losing traders to fail are quite common and readily identified. The better news is that by being aware of the potential for making these mistakes and by taking steps to avoid them, you can make a great leap towards becoming a more consistently profitable trader.

To generalize using the broadest stroke possible, the high rate of failure among derivatives traders can be attributed primarily to three factors:

• The lure of easy money
• The lure of excitement
• An utter lack of preparedness to deal with the potential downside

To counter this one of the ingredient is to have a clear trading plan. Let’s talk about it today.

In derivatives trading, a surprisingly high percentage of traders enter the markets without the slightest idea as to how they plan to succeed in the long run. Very few traders begin trading only after they have carefully thought through and planned their foray into the “exciting world of speculation.” Most are so anxious to get started that they just don’t take the time to make the proper preparations. This phenomenon alone goes a very long way towards explaining the high rate of failure among derivatives traders.

So, why Do Traders Make Mistake?

The answer to the question “why do traders make this mistake” could probably apply to all of the mistakes. The primary cause of 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 derivatives trading offers just that possibility (which is exactly what makes derivatives trading so alluring, yet so dangerous).

How to Avoid these Mistakes?

The only way to avoid this mistake is to devote as much time, effort and energy as needed to develop a trading plan that addresses all of the key elements of trading success. This daunting task moves derivatives

trading back from the realm of fantasy squarely into the realm of reality. Your plan will serve as your road map to guide you through the twists and turns that the markets will throw at you.

There are many factors to be considered before one delves into derivatives trading and which need to be revisited and possibly revised as your experience and expertise grow. Yet for far too many individuals these issues are dealt with on an “as needed” basis, usually when there is money on the

line, and usually when money is being lost. This is exactly the wrong time to be making critical decisions because they are more often than not based on emotion rather than on sound thinking. In developing a trading plan there are many questions to be answered and many different possible answers

Happy Trading!!!

Cheers.