One of the biggest mistakes traders make is trading too frequently.
You might think it would be something more complicated. Something like misinterpreting patterns, setting stops too loosely, or violating trading rules. But it's not. It's trading too frequently.
Why? Well, here's what I think...
Most people (including me) were brought up believing they must work hard to make money. It's almost like they can't believe that making a lot of money could actually be easy.
Because of this, they end up trying to "work hard" at trading. And their idea of working hard is trading as often as they can.
Trading frequently wouldn't be such a problem except it often means taking a lot of sub-optimal trades.
People who believe they must work hard at trading end up taking bad trades just to feel like they're "earning their keep." Instead of waiting for an ideal trade to come along, they get into trades on a regular basis--no matter what!
This "trade-as-often-as-you-can" approach is highly counterproductive. Chances are you'll suffer big losses.
Take the case of Jack R. In September of 2007, he made 41 trades. More than one trade a day. He made some money, but not as much as he might have.
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 brought his laptop along. He planned to do some trading while he was on the road. But even though he had his laptop, he didn't have a good Internet connection.
Jack only made 26 trades in October 2007 because of his limited Internet access. The trades he did make were more strategic and better planned.
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.
Be a lazy trader instead.
Be patient and wait for the right moment to enter a trade. Make a handful of really solid trades instead of dozens of mediocre trades.
Never violate your trading rules just to feel like you're being productive. Be patient, take only the trades that fit your criteria, then sit back and reap the financial rewards. And that is why you should be a lazy trader.