Trading Crimes Against Your Self.



These trading crimes are crimes against yourself.

With these crimes, the perpetrator is also victim, and the price for being caught is 'capital punishment'!

Like most crimes, the perpetrator often gets away with it, which may embolden them to repeat (thus developing bad habits), but eventually they get caught. Mr Market will always find you and Mr Market is an unforgiving judge.

"Mr Market will always find you and Mr Market is an unforgiving judge."

The price extracted by the market can vary. The price may be holding back your progress, or the price may be dramatic drawdowns in capital, or even entire loss of capital and the ability to ever trade again: Permanent exile from the market.

This list below is an unfolding list based on a series of tweets on our twitter feed@alphamind101 presented in a mostly ‘tongue-in-cheek’ style. However, the message is clear, these are behaviours which if they become habitual, will undermine your chances of success.

The list we be updated as new tweets in this series are published. There is no hierarchy to this list.

Trading Crime #1
Removing Stops. A classic mistake of the novice trader. Experience, often painful, teaches most traders this lesson.

There are some exceptions to this crime that more experienced trades are usually able to practice. E.g. Ahead of volatile news, or based on unfolding price action, which lead to a stop adjustment.

Trading Crime #2

Refusing to pay-up because it’s the high of the day
(Or sell because it’s the low of the day). Everyone buys the high some time (A new twist on an REM classic).

There are few things more painful than not paying up only to watch the market then race away.

Trading Crime #3
Blaming the algoes, the banks, the funds, the devil, anyone.

Taking responsibility for your outcomes is part of your growth curve. The moment you start pinning the blame on others is the moment you stop learning and start failing. – For blamers, failure is baked in down the line somewhere. – It will get you!

Trading Crime #4
Taking someone else’s trade.
This leads to some of the biggest trading disasters. The perpetrator does not have a plan, the person you copied does. You are flying blind.

Even seasoned traders get caught out with this one, particularly when high expectations are placed on them.

Trading Crime #5
Multiple momentum indicators on your screen.
You only need one weather vane to see which way the wind is blowing. You risk engaging in a massive act of confirmation bias. - I use to be guilty of this one.

Trading Crime #6
Pulling your bid as the market approaches it, only then to chase the market as the it bounces off your level and soars away without you on board.

‘Guilty as charged’ - This behaviour was one of my worst vices.



Trading Crime #7
The short-term trade you fail to cut that becomes a long-term position.
This is your ego failing to admit you were wrong. Who is it fooling? Now you are sitting with a trade you didn’t plan for, pretending it’s the greatest trade ever.

Trading Crime #8
Marrying a position, view or belief.

This one creeps up on you when you least expect it. It rarely ends well. I committed this crime this 8 years into my trading career. It became the biggest setback I ever suffered. I paid a heavy price which set me back years.

Trading Crime #9
Celebrating Prematurely: High Fiving, Fist Bumping, etc, in a trading room.

Never, ever, under any circumstances do this. It might be ok on a tennis court, but remember in a trading room, the market gods will be watching you.

If you ever find yourself doing this. Square everything, grab your coat, head down to the nearest church, synagogue, mosque, temple, or pub, and start praying for forgiveness.

Trading Crime #10 - This is a Big One.......
Not Making Time for Your Family, Friends, Loved ones.

'Trading Failure' is getting to the end of your career, having made a pile of money, but having missed seeing your children grow.

That is a price beyond money. You only have one life.



Trading Crime #11
Caring so much what others think about you, that you do things you shouldn't, or don't do things you should.


Read this article: 'Ego and Trading: A True Trading Horror Story.'

A word of advice. - Most people are too busy wondering what you think about them, for them to be worrying about you - Let it go!

Trading Crime #12
Not listening to your Gut. 
Somewhere along the line you will start to develop intuitions. Some of these may mislead but others will give you advance warning that something is afoot.

Every great trader has at some point cultivated intuition and learned to make it work for them. It becomes a huge edge. It may get you out of trouble, it can lead you in new directions through brilliant insights, and it can become a source of great opportunities.

Gut and intuition, are the art of trading. If you fail to heed your gut's advice at times, you are forgoing a potentially massive edge. But also you have to be willing to accept that it will be imperfect and occasionally will mislead. 


Trading Crime #13 
Seeing what you want to see, hearing what you want to hear.

This can be deadly to your trading health. It’s pure confirmation bias. Fight this crime before it shuts down curiosity & leads you to dark places.

Trading Crime #14 
Waiting for the Perfect set-up or entry.

Go on, admit it, you've done, probably too many times for your own good. - Perfect set-ups and entry's don't exist. Its called risk for a reason. 



Trading Crime #15
Falling to increase your Risk Size as your capital grows.

This one results in real  'Capital Punishment' (get it!).

Failure to do this leaves vast potential profits on the table. See this earlier article 'The Massive Hidden Costs of Not Scaling Up Trade Size'.

Trading Crime #16
Grabbing at Profits before you fear they disappear.

This heinous crime is almost certainly likely to be contradictory to your long-term performance.

Trading Crime #17
Immediately reinstating a 'Stopped Out' position.
We've all done it, and we've all paid the price. But those who repeat this behaviour, pay a very big price.

Trading Crime #18
Running Losses
This is the sibling of Trader Crime 15. It seems like a good idea at the time, but then so do many things we shouldn't do which we later look back upon with deep regret.

It is plain and simple, if you keep doing this, eventually you are going down. You may get away with it, sometimes for years, but eventually Mr Market will catch you. 


Trading Crime #19
The Revenge Trade
Who exactly are you taking revenge on ?

Yes, this is the ultimate crime where you are truly both perpetrator and victim. You are punching yourself in the face.

The revenge trade is complex, very complex. but remember this old Confucius saying: “Before You Embark On A Journey Of Revenge, Dig Two Graves” — with trading however, its just one very deep grave. 


Trading Crime #20
Failing to practice basic Money Management.

You will spend a lifetime in trading hell if you fail to adhere to the basic principles of Money Management. No ifs, not buts, no excuses.  


Trading Crime #21
Chasing Your Tail

A classic error is the desire to make back what you lost. In doing so 'you become lost'. 

Rather than trading to your plan you just go round in circles, like a dog chasing its tail. Try to stop yourself, walkaway, get back to plan, or there will be a heavy price to pay.

Trading Crime #22
Doubling Down

The mind says "If you thought it was good value then, it's even better value now". 

This one doesn't always end in tears at first, but that sets you up for a bigger fail eventually.  
  
There are exceptions, where its part of a pre-prepared plan, but that's a different story.  

Trading Crime #23
Staying with a bad trade, because you are already in it. 

People lose objectivity once they are in a trade. This also extends to the idea or belief behind the trade. This is an 'ego', driven crime. The belief that you are right, trumps an objective assessment of reality. 

This attitude is behind so many other crimes mentioned. Eg. Crimes #1,7,8,11,13,17,18, 21, 22. 

This series of ‘Trading Crime’ tweets will continue to build over coming weeks. Please feel free to share with colleagues and friends, or to keep as part of your own library of Trading resources.

If you have any comments or useful insights to add, please feel free to put these in the comments sessions at the bottom of this post.


Article by Steven Goldstein

Steven Goldstein is a Performance, Team and Executive Coach who focuses on helping improve the 'mindset' aspects of Risk and Financial Markets' people and businesses.

Core to Steven's work is the belief that everyone has the potential, often latent or hidden within them, to surpass where they are and to grow into what they want to be. He views trading as two concurrent battles, one a person has with the markets and one they have with their self. To succeed a person must win both. As a coach, Steven works predominantly on helping his clients win the battle with their self.  

Prior to becoming a coach Steven worked for more than 20 years as a Rates and FX trader at some of the world’s leading investment banks. See Steven's Full Profile.

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