Making too many trades is one of the most common (and destructive) mistakes traders make.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 is this? Well, I have a theory about that...
Most folks have been raised with a strong work ethic. As a result, they don't believe it's possible to make a lot of money with little effort. They think they will have to work hard.
Unfortunately, this causes a lot of traders to "work hard" when they trade. And hard work almost always means trading too frequently.
Frequent trading wouldn't be so bad if every trade was perfect. But that's not that case at all.
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 approach to trading is detrimental over the long haul. In the best case, your profits are reduced. And in the worst case, you've got to live with 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.
When October came, he and his wife packed up their SUV for an extended road trip around the U.S. This turned out to be a good thing.
Since Jack is an option trader, he brought his laptop so he could still continue trading. But what he didn't expect was that he rarely had an 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 point...
Trading doesn't have to be "hard work." In fact, if you think of trading as "hard work," you might end up making a lot less than you deserve.
Be 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.
And stick to your trading rules. Be patient. Only take trades that meet your criteria precisely. Then sit back and enjoy your financial reward. This is why you should be a lazy trader.
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