5-Step Guide to Avoid Repeating Trading Mistakes

There’s this misthought that becoming a professional trader means reaching a level of no mistakes - pure flawless performance. Although it’s a good goal to work towards, mistakes are an inherent part of this performance skill.

So what sets amateurs and professionals apart?

The difference lies in the execution of those mistakes.

Professionals identify their recurring mistakes, develop action plans to prevent their repetition, and minimize their negative impact when they do happen.

On top of this, there are first-time mistakes that occur due to changing market conditions and evolving trading edges. These mistakes are useful as they prompt us to adapt our performance and grow its resilience.

Nevertheless, the majority of trading mistakes are repeatable - they persist despite a trader's awareness of them. So I've put together a simple and effective 5-step guide that will help you avoid repetitive mistakes. By following these steps, you'll be on your way to becoming a more successful and disciplined trader.

Step 1: Recognition

Being aware of the rush of emotions is the first step.

At the first point, it's not about delving into your mind (yet); it's simply about noticing when your emotional state shifts, leaving you feeling bothered and out of balance. This is a clear indication that you've been triggered.

Knowing your specific triggers is of extreme importance here. The first practical activity of my E-book: Building The Mindset of A Trader, is all about finding out what your triggers are.

Step 2: Interruption

Once you've noticed the sudden shift in your emotional state you need to interrupt the autopilot mode. When you’re triggered, emotions tend to intensify, so trying to make the right decision under stress is worthless. The smartest decision is to stop for 6-10min.

The first feedback I have from traders when I tell them this, is “What if I miss a trade while I’m in the interruption step?”.

I often answer them with the question: “What was the last trade where you performed well and were triggered at the same time?”. Most times the trader doesn’t remember, this is because it’s hard to perform well when our emotions are very loud.

Calm and confidence are as legitimate “emotional confluences” for your trade entries as any other technical confluence. Therefore, they should be part of your high-quality setup!

Similar to how you choose specific confluences or patterns for your technical edge, think about the "emotional confluences" that support your mental edge. Stress, anger, and fear are definitely not among them.

Any trades you may "miss" while going through this process should not be seen as missed opportunities, but rather low-quality trades that you skipped because you were not in the mental state to maximize their potential.

Step 3: Body Regulation

We cannot use the mind to control the mind.

The interruption of your normal behavior is valuable on its own, but it becomes more effective when coupled with the regulation of your emotional response.

How can you achieve this?

Every emotion has a different body signature, meaning physical manifestation. Anger, for example, is characterized by an accelerated heartbeat, sweaty hands, and rapid, shallow breathing, among other visceral changes within the body. On the other hand, calmness is characterized by a regular heartbeat and more relaxed breathing.

The mind cannot directly control the mind to change the emotional response. Telling yourself to be calm or disciplined during moments of stress and anxiety is useless. The mind can only be controlled through the body first.

When we get triggered, accessing the prefrontal cortex - the area of the brain responsible for conscious decision-making - becomes close to impossible. So the first thing is to bring yourself to a state where you can effectively utilize it.

To achieve this, you can practice a simple breathing technique that allows you mental clarity: Inhale twice (the second inhale works as an extra), followed by a slow and prolonged exhale. The impact is immediate! You'll experience a heightened sense of relaxation, enabling you to see your thoughts more clearly. By doing this, you've successfully diminished a significant part of the emotional trigger.

Step 4: Self-Awareness

Often, traders find themselves asking questions like, "Why did I make this mistake again?" or "Why am I feeling so impatient?". The “Why?” can be asked with an accusatory tone - negative self-talk - which doesn't contribute much to finding a solution.

Instead, replace "why" with "how".

Asking yourself how you are experiencing the trigger brings forth acceptance and self-compassion. This simple shift in perspective can automatically trigger a positive change in your emotional state.

Rather than dwelling on the past or beating yourself up over mistakes, focus on understanding your current emotional state and how it influences your decision-making. That’s the goal of this step.

Step 5: Replacement

Now, you’re in a better place to raise your confidence toward what you know to be the right decision.

Without the initial recognition, regulation of your body, and understanding of your mind, implementing a replacement technique would be impossible. This final step serves as a push to ensure you make well-informed decisions.

The essence of this step is in finding a piece of evidence that boosts your confidence in making the right choice.

I shared an article titled "Let Your Profits Run," where I talk about the usual mistake of taking profits too early. In the final section, "Plant Evidence," I delve into this replacement technique and offer practical suggestions for it. I highly recommend giving that final part a read for the completion of this 5-step process.

Final Words

When it comes to stopping yourself from repeating trading mistakes, trying to control your feelings won't work. It's essential to go through a process of deep understanding, acceptance, and body regulation before you can truly make a change.

Use this 5-step guide to help you practice a new pattern and create a positive association in your brain that aligns with your trading goals:

1. Recognition

2. Interruption

3. Body Regulation

4. Self-Awareness

5. Replacement

With love,

Sara

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Whenever you’re ready, there are two ways I can help you:

1- Eradicate your worst trading mistakes with my E-Book here.

2- Elevate your trading performance with 1:1 Coaching - The Peak Performance Trading Program. See if you qualify here.