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Top 5 Mistakes Beginner And Retail Traders Make

Top 5 Mistakes Beginner And Retail Traders Make Introduction

Welcome to the top 5 mistakes beginner and retail traders make. The lessons described below are based on the adjusted transcription from the video that has been recorded by our Junior trader Bogdan. I personally relate to all of them, but those that resonated with me the most are Going Live Too Early and Not Intimately Understanding Your Tools And Markets. I find this video very helpful mainly because as Bogdan has mentioned, it is not some generic copy-paste version of top trading lessons circulating the internet but hard lessons and observations from being on the actual trading floor. This is what @Trader_Bran wrote about it:

So enjoy the transcript of the video down below:

5 Mistakes Beginner And Retail Traders Make

Introduction

Hey guys, welcome to the top five mistakes that beginners make while trading futures or any trading for that matter. These lessons are collections of lessons I learned by myself, others from the trading floor, and the sort of collective shared experiences of many who have come before as well. Enjoy.

#Lesson 1 – Putting Yourself Into A Box Too Early In Your Career

Too many times, I see a lot of new traders, a lot of junior traders on our floor, on Twitter, and on internet forums, who love to put labels on the kind of trading they do. And of course, this just extends to everyday life. It’s not just trading, but obviously, within our sphere, we see this a lot where a trader may see how a piece of news affects markets and the huge burst of volatility. They may get scared and start making excuses like “I’m not a news trader”. Or someone who may trade news very well may look at a chart and say: “Oh, you know, I can’t make sense of this. I can’t be consistent in this kind of trading”. And so they say, I’m not a technical trader, I am a news trader. I’m going to be a scalper or x, y, and z type of trader. So here are basically two mistakes. First, you are trying to cut the market up into a very small, convenient box for you to understand, which is a mistake. Especially if you’re new to trading and you have the outsider’s perspective, you have newbie eyes to look at the market and it is very difficult to break up a very complex organism, a complex system like markets into a very convenient box for you to understand. Or take the example of those who say they don’t look at news, they don’t look at fundamentals, because it’s all reflected in the chart. This form of judgment happens too quickly, especially if it happens early in your trading career. Now, for those who are very new to trading, they will find someone who is just an excellent chartist for example. It could be someone like a senior trader who has years of knowledge reading the charts. But that’s just because of their experienced eyes, the lens through which they see things and the way they would describe certain things, and see certain things that may seem completely different to you. This very comparison or inspiration by this trading role model will lead you down the wrong path into overly specialized trading too early in your career. Becoming a chartist only because of this false specialization. This mindset might block your learning and you’ll never open your mind to the possibility of trading news and maybe who knows, you would have become the fantastic fundamentals newsreader or vice versa if you would not pigeonhole yourself into this box of overspecialization too early.

You see this a lot on online communities where people like to place themselves in various tribes, like, “I’m only trading on the ladder”, and my tribe is the best the price ladder tribe, and there’s no other. I’m the best everyone else is an idiot, nothing else works, and so on. So it is very dangerous leaving down that path of the ego and safe tribalism. Now, what I would say is, if you have been finding yourself and if you have been trading anywhere between 3-24months, you should not be making these kinds of claims like I am an X, Y and Z trader because the markets will evolve and so must your spectrum of tools. And you have to understand where you place yourself within that spectrum over time, not too early in your career..

#Lesson 2 – Going Live Too Early

Going live too early or perhaps putting too much pressure on yourself too early. So this is one mistake. I made this mistake myself very intimately at the beginning of my trading career and I see this time and time again, which is this obsession to race to trade live or to trade with some kind of skin in the game simply too early. Now, obviously, don’t get me wrong, skin in the game is essential, especially when learning but that should come much, much much later down the learning curve than one would expect. I see this a lot with a lot of the junior traders where their ability to learn and to soak in information is high. So in its pure sense with no emotional attachment to trading, the quality of learning is just way better. The minute they add pressure to themselves, even if they’re not live, but let’s say there is a requirement for them to pass a funding trial to go live or to meet certain criteria, the learning is suppressed. So in any case, whatever pressure you apply too early the learning curve will be most likely affected. You’re regressing too early. I’ve experienced this a lot in my career and it’s very easy to delude yourself that you are learning when in fact, you are not, which is going to be my point number three. So remember, it’s very easy to fall down that path.

Now let’s take an example of my desk mate on the other hand. So my desk mate here on the London trading floor was on the sim for about 16 months before he went live. Now, of course, during that 16 months, he also had a period where he had to pass a sort of a rules-based assessment for him to be funded to go live. Nevertheless, 16 months for him to go live. Most people watching this video right now, myself included, would not spend anywhere near that amount of time, watching markets, studying markets, really reflecting on what they’re learning. Too many of us will go in headfirst thinking they’ve got this, this is easy, and so on, only to really not only drop your whole account to lose a lot of money, but then to not really learn anything from it. Because of that rush, that agitation that FOMO to get live as soon as possible.

#Lesson 3 – Not Having A Structured Learning Process

Okay, so let’s talk then about mistake number three. And this is really something everyone can implement right now, from day one. Your progression does not start until you get these things right, which is a proper routine and a proper structure every single day, weekends included. This means you’re going to show up and have a morning routine, you’re gonna have a preparation routine, before the market opens, you’re going to consistently trade the same market hours for as long as possible, every single day when the markets are open. And then you’re gonna go through a period of reflection of the debriefing when markets are quiet. And of course, doing something of a more macro a wider approach on the weekends. That is the bare minimum entry requirement of hard work that you should be doing to even be considering having a career in trading. Ticking off boxes, day in day out, reflecting over time what is the proper debrief for you. What are you trying to capture from the markets? What are you trying to achieve? What evidence are you trying to gather and learn? How are you understanding the market through your own lens? It is so many of these little things which count but makes your eyes spin at the beginning. But there is no way around it. And, you know, perhaps you skip reading here because you already know all of that but it’s probably the most important point in these lessons. You need to have a learning system, a debriefing system, a way for you to reflect on good trades, bad trades, and understanding where that is and how to access it fast.

Relating to mistake number two, which is putting pressure too much on yourself too early, even by being on the sim trading thinking about taking trades is one step removed from pure learning. When I bring up your learning what do I mean? It’s sitting there day in day out, not even taking trades, even on the no consequence simulator. It is just sitting there observing markets holistically, looking at how they reprice risk, how they price risk, how news affects them, how news doesn’t affect them, how the market profile looks like how the order flow looks like when you know markets move around and everything. So you’re soaking in how are you learning from that process, and then you’re adding another layer of the debriefing and learning. Then, once you’ve slowly applied the pressure at the correct time, then you’re thinking: “Okay, and now how do I improve my processes?” How do I extract more from my good trades? How do I stop incurring so much damage from my bad trades for example? And this is not, again, an exercise where you’re just entering an excel sheet of the entry-exit size that you took, and so on, it’s much, much deeper than that. We talk a lot about this on the Axia trading floor. Where are the nuances in your trade and how are you placing these nuances? What sort of features were unique to that trade you saw, perhaps next time when you see a similar type of trade, you will take action with higher conviction.

#Lesson 4 – Denying Responsibility

So this trading mistake manifests itself in many, many different ways. But one of the most popular ones which we see repeatedly is blaming things on the algos, blaming things on the hfts, the stimulus, etc. This really comes from two things. One, you will actually notice that the less time someone has been actually trading, the more opinionated they are on this. The less time someone’s been trading, the more they’ll tell you. They’ll tell you order flow doesn’t work. They’ll tell you charts don’t work. They’ll tell you, you cant trade the news because of the algos and on and on and on. They’ll use this escape mechanism because they still don’t understand that because they expected they will trade markets for two weeks and do amazingly well from the beginning. And if they can’t get it, no one else can. So there must be some kind of catch, there must be some kind of thing that makes it impossible for anyone to trade. And they know it because they read some forum posts about someone or some tweet about some random stranger saying how it’s impossible because of the hfts, because they also can’t perform to a high level and they find some kind of mechanism to absorb responsibility. Now the big mistake for you is that you’re onto this. And then flying under the banner of new contract order flow because of the hfts you can’t trade well. And so really the mistake is understanding this kind of feature where so much of this conversation is made by other people who have traded for a very little amount of time or may have traded before and were successful and now are no longer successful. And you enter this fear too which is very difficult to resist and to be honest, you will not know any better either because you are just starting out too, trying to figure it out. This relates to mistake number 1: do not box yourself into this kind of negative thinking and this sort of mentality. So regardless of what’s going on, there will always be opportunities in the markets. You just have to be open-minded enough to shift your perspective and to take advantage of these market features and opportunities that will come. If your edge stops working, it is a normal part of trading and then it’s your responsibility to readapt, relearn and move on, instead of then absorbing responsibility saying, I can’t do this, and the market is rigged.

So again, it’s funny to see that many of the people who will give you these strong opinions probably have not been trading for very long. And as you go across the curve of people who are consistently profitable, who are career traders, who have been trading for very long time, you will notice the abundance of opportunity and how they’ve shifted their careers from trading one thing many years ago, and now are trading something completely different. And in the next five years, they’ll also probably have evolved their trading just suits the current market. And that is the story of everyone, especially all the senior and elite traders, here on the prop floor.
They can all attest to this, of how you have this constant evolution, and should not get dragged down by others with this sort of negative mentality or this way of denying responsibility.

#Lesson 5 – Not Intimately Understanding Your Tools And Markets

So mistake number five, it’s not understanding at a granular level, the tools you are using for the markets, you are trading. So, for example, there’s plenty of people who claim that they are order flow traders, yet, if you talk about using a footprint, if you talk about using certain things like the Delta, they ask you how this relates to that. They don’t intuitively understand how the price ladder mechanics work. And that’s because the questions they ask me in AMA if they truly understand price mechanics, they could intuitively figure out the answer to those questions. So it’s easy for me to pick out those who don’t understand that the moment they ask. Dynamics like passive vs aggressive bid/offer, absorption, various auction processes, what happens when someone has to liquidate, etc. How deeply you understand the dynamics of both the market auction mechanics and your specific market you are trying to trade.

And again. Do not insist on understanding just the price ladder intimately. Dig deeper. It is your duty to do this if this is your career to understand every single asset class closely as you expose yourself to those opportunities as early as possible because there are fantastic opportunities to be found. Yes, I’m looking at the price, standard profile, and many other things. But I’m also going to take the time to understand the derivatives I’m trading, what are actually futures in the first place? Why am I even trading futures? What’s the underlying market? How do bonds behave in certain market conditions, how do the equities behave, and so on. So again, it is making sure you don’t, in a way absorb responsibility as well by saying, “you know, this is too difficult for me to understand”. That is your duty to self-learn, self-educate. So the spectrum is broad, from footprint dynamics, price ladder to product understanding and fundamentals because you’re building a whole career for the rest of your life, ideally, into this field.

Closing Note

Treat yourself as a high-level athlete, you’re building yourself to have a high level of an athletic career, which is the best metaphor in trading, and while you’re building all these skills, you’re becoming a multi-dimensional trader. And that requires a lot of different skills that are completely different from each other. You are building this as time goes by because it is an investment into your future edge. You. It is a very difficult profession. And it is akin to something of a high caliber, professional, high caliber sport, which you know, to remind everyone, there is no amateur league in trading. You will be competing with everyone who intimately understands the price ladder, knows to the nth degree everything there is to know about asset class fundamentals in multiple different asset classes. You’ll be competing on the same level of stuff, in one arena. So for you to even have hope of reaching that kind of level, you have to be putting in the work early in your career, and hopefully by understanding these hard-earned lessons make a career in trading.

Thanks for reading this adjusted transcription of the 5 Lessons Beginner And Retail Traders Make and in case you would like to check each mistake in the video on its own, here is the breakdown:

00:00​ – 5 Trading Mistakes
00:28​ – Putting Yourself In A Box
04:10​ – Going Live Too Early
07:21​ – Not Having A Structured Learning Process
12:25​ – Denying Responsibility
17:25​ – Not Intimately Understanding Your Tools And Markets
22:59​ – Conclusion

If you liked this type of content, you might check these videos as well:

If you like our content and would like to improve your game, definitely check one of our courses that teach you all the techniques presented by AXIA traders from a market profilefootprint, or order-flow. If you are someone who likes to trade the news, we have a great central bank course. And if you are really serious about your future trading career, consider taking AXIA’s 6-Week Intensive High-Performance Trading Course.

Thanks for reading again and until next time, trade well.

JK

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Written by Jaroslav Kohout

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