 Welcome back to the Trade Hacker Mindset. In this episode, we are going to discuss eight trading mistakes that you must avoid. Trading the markets can be difficult to master and seemingly just out of reach. Professional traders have a secret. Trading requires total mental and emotional control. It requires the Trade Hacker Mindset. All right. So let's jump into this discussion of eight trading mistakes that you must avoid. And these all have been kind of compiled over the years from emails that I get from our members or folks in our community or posts that people make in our community. And I've just been kind of compiling these because I see these recurring over and over and over. Now, I wouldn't say these eight mistakes are a complete list. You know, there are definitely others out there. But the eight that we're going to talk about today are really going to cover a vast majority of the mistakes that you make as a trader. And if you can avoid these mistakes, it's going to make you much more successful. All right. So let's get started. Number one, position bias. Okay. So what do I mean by that? Well, let's just say you buy a stock. Let's say you buy Apple stock. Now, what tends to happen when you are in a position is that you tend to look for things and information and news and any, any information that supports the position that you are currently in. Okay. So if you're in Apple, you know, you might start looking for news articles on Apple or you might start going to their website or listening in on their conference calls and trying to find reasons why owning Apple is a good thing. And so what happens is no matter what price does, in other words, let's say you, let's say you got into Apple because it pulled back. It's in a, it's in an uptrend. It pulled back to what you think is a solid support level. And that was your reason for buying. And originally it, it was intended to be a short-term trade. You were just trying to catch a bounce to a certain level. But then you started gathering all this information that supported the aspect. Maybe they came out with a new product or made a big announcement and it supported the idea of holding the stock because now you think it's even going to go higher than you originally thought. Or you start having thoughts like, well, everybody has an iPhone. Everybody now has AirPods. Everybody's got an iPad. Everybody's switching over to Mac computers. And all of these things that you've gathered are starting to create this position bias, this bias towards the position that you have to create a, a kind of an illusion effect of why you should stay in the stock. And let's say now the stock starts to fall, but you still have all these biases because of all this information that you gathered that supported your position. So even as it continues to fall, you know, maybe you don't get out. And even worse, maybe you start to buy more and start to average in. Then of course, as Murphy's law would have it, it just keeps going down until the point where some bad news comes out. Then you cry uncle and you bail out of the stock and you take a loss. Okay. Have you ever found yourself in that position? Okay. I have, I can admit it. I've, I've had position bias a couple times in my life, maybe more than a couple. But that, that is one mistake that you want to try to avoid. And one way to help you avoid position bias is to get in on very specific criteria and get out based on very specific criteria. Maybe that's price movement. Maybe that's for a certain period of time. Whatever your criteria is, have that in mind before you enter the trade and stick to your rules that you've of criteria that you've created so that you exit at a specific time and don't allow that position bias to infiltrate you as you continue to hold that position. And you know, position bias can work the opposite way as well. You know, I see, I see people not only gather information to support their position, but I see people get in a position and then start to gather information or find reasons why they should not be in the position and they exit early. And then of course, the stock goes on to make the move that they originally thought it was going to and had they just stuck to their original plan, they would have booked a lot of profits, but they got out early and took a small profit or ended up taking a loss. So whether it's a positive position bias or a negative position bias, try to avoid either one of those. All right, number two, external blame. Have you ever blamed anything outside of yourself for losing trade? I bet you probably have because I hear it all the time. You're blaming the market. You're blaming the strategy. Sometimes you blame me or navigation trading. That's my favorite. The reality is you have to take sole responsibility. You have to take complete ownership of your trades and the trades that you take. Your broker is not watching your positions and they are not hunting your stops. They are not looking at what your positions are and then pushing the market against you, okay? That doesn't exist. And I think from a human nature standpoint and what I see a lot with newer traders is whether you consciously realize it or not, I think a lot of times you take credit for the winners but you blame an external force for the losers. And that's just our natural ego talking, right? We've always been taught that being wrong is bad and so we don't want to take blame for being wrong, for losing money on the trade because that would mean that we have to have responsibility whereas if we do something good, we want credit for that. If we have a winning trade, we take credit for that. So be very, part of this is just self-awareness. Be very aware of how you feel after you close a winning trade. Be very aware of how you feel after you close a losing trade and make sure that all the credit or the blame of that trade is solely on your shoulders and there's no external blame. Trading mistake number three, hindsight bias. So what do I mean by hindsight bias? Have you ever looked at a chart and looked at, you know, over the history of that chart and kind of scrolled through a chart and analyzed the price movement and thought, wow, I knew exactly what to do at these different points. I knew the market was going to go up at that point. I knew the market was going to go down at that point. I knew that stock was going to take off. I knew that stock was going to drop. Have you ever had those conversations with yourself as you were looking through charts? And hindsight bias comes in all shapes and sizes. I mean, when you look back at a chart, it seems like it's pretty easy to catch exact tops and exact bottoms, right? But as you know, if you've been trading for any period of time that catching exact tops and exact bottoms is nearly impossible. In fact, what we're trying to do, especially on a directional type trade, is we're just trying to take the meat out of that position, out of that move by no means are we trying to catch the exact top or the exact bottom. The other place that I see hindsight bias a lot of times is very fuzzy long-term memory loss, I guess you could say. And what I mean by that is you can always look back and say, gosh, I knew I should have bought Amazon when it was $10 a share. I just knew it. I knew Amazon was gonna be a great company in 1999 when all the tech stocks were going up and then it crashed. I knew Amazon was gonna make it. Now Amazon as of today is trading at over $3,300 per share. If I just would have bought it and held it when it was $10 a share, I would have turned $1,000 into $10 million or whatever it is. That's obviously not the correct math, but you know what I mean. Like you could say the same thing about Apple. I knew Steve Jobs was a genius. If I would just would have held Apple when it was $10 a share, or maybe it's a situation where you did actually own the stock and then you ended up selling it, bought it for 10, sold it for 20. If I just would have held that $10 stock until today, I would be a multi-millionaire. This is all hindsight bias. Everything is crystal clear when we look at it in hindsight. But making those decisions in real time is a completely different story. So don't get caught up in hindsight and beat yourself up about what you think you should have done because hindsight is always 2020. Number four, price entry bias. Now, have you ever gotten in a trade, and let's say you bought a stock at $50, and this is a short-term trade. So let's say you bought a stock at $50, and then it goes up to $60, and you don't sell, and it comes back down, all the way back down to your entry price of $50, and you get out. And then what happens? It bounces and goes back up to $70, right? So the market doesn't care what your entry price is. And so one of the things that we teach, especially when we're doing our live day trading, is we always talk about don't trade your P&L, trade the charts. In fact, I hide my P&L so that I cannot even see it while I'm still in a trade. Because what happens is if I see a trade go in my direction and I see this profit accumulated in my account, and then it comes all the way back down to my entry price, remember, that money was mine, right? I saw it in my account, and now it's all coming back to zero, and I don't want to lose anything, so I cut out of the trade. Well, if I was just looking at the chart, if I was just looking at those red and green candles on the chart, would I have the same emotional connection as if I was looking at my P&L? The point is price entry bias. So would I, if I didn't enter at that price, if I had waited five minutes and got in at a different price, how would that change how I hold or exit the position differently? So I think when we get in trades, all of a sudden our entry price, our price that we happen to get in at becomes this magical level that we have to trade around, but the market doesn't care what our entry price was. And if we just push that aside and focus on the charts, focus on why we got into the trade, focus on the rules of the strategy, that's gonna bode much better for our success as a trader than trying to trade around our random entry price on a trade. Trading mistake number five. FOMO, fear of missing out. How many times have you seen a move happen that you thought about getting into and then it moved in that direction that you thought it would move or in your mind, you knew it would move, but you didn't place the trade and now you're having FOMO. You wanna get in and so you jump in because you know it's just gonna keep going and what happens, it immediately reverses against you, you end up getting out and taking a loss. You have to stop chasing profits after the move has already happened. If you're going to take a trade, get in based on your criteria, get in based on your strategy, get in based on your rules at the time that you're supposed to. If the move happens, it's over. You can't get in, you can't chase profits, you can't have that fear of missing out. All right, trading mistake number six. Trade sample size. Ooh, this is a big one. I see posts in the community and I get emails all the time about this where they've taken a couple trades and those trades have been losers. And so I'll hear comments like, I've taken the last couple of trade alerts that you did for this strategy and they've been losers, is something wrong? Is should we stop taking this strategy right now? Is this not a good time in the market to be using that strategy? So if they haven't told me how many of these trades that they've taken, that obviously is my first question. Well, so how many of these trades have you taken to have this concern? And the answer is usually like two or three or eight or 12, like do you realize that that many trades is a super tiny sample size that has zero relevance on the validity of a trading strategy? You know, that's like me saying, okay, flip this coin 10 times and you come back and you say, well, I was heads and it only hit heads two out of 10 times. So therefore there's something wrong with this quarter. The probabilities of it hitting 50, 50 heads versus tails, that, you know, is this a good time to be flipping a coin because I only got two out of 10, correct? When I talk about it like that with a coin, which most of us understand theoretically, it's a 50, 50 probability, but if you flip the coin 10 times, there's a very, very, very high likelihood that it's not gonna come out five and five every time, right? But if you flip that coin a hundred times, now you're gonna start getting closer to that 50, 50. If you flip that coin a thousand times, you are going to get very close to that 50, 50 probability of 500 heads and 500 tails. So the same holds true in trading. If you have a strategy that has a 70% win rate, that also means it's going to lose 30% of the time. That doesn't mean that every seven out of 10 trades will be winners. That doesn't mean every 14 out of 20 trades will be winners. That means that over time, over a large number of occurrences that the winning probability of that strategy will be about 70%. The way that we trade at navigation trading is completely based on statistics and probabilities. So unfortunately, we see people all the time have this bias about a specific strategy after they've done the strategy three times or five times or 10 times. And that's why we tell people for every strategy that we teach, you need to paper trade that strategy at least 100 times. A, you're gonna pick out some of the nuances that come with that strategy. You're gonna get to see how the strategy reacts to different market movements in those 100 paper trades. But also you're gonna see those probabilities get a little bit closer to what they are statistically because 100 is a decent size sample size. It's not three, it's not five, it's not 10. You need to do 100 trades to really get an idea of a trading strategy and a sample size and then also be aware of how to have a market awareness. If you're taking short bias trades and during that period the market has continued to rip higher, well, what do you think your win rate's gonna be? Pretty low, right? I mean, you took short trades and the market ripped higher. So those are probably gonna have more losers than winners. And the sample size part also comes down to journaling or tracking your trades. Our minds have a tendency to create biases on a subconscious level that we don't even realize, but if you can do this 100 sample size trades on each strategy and journal those and make notes and understand that's gonna help you tremendously give you a perspective about a specific strategy or a specific trading style. And then you can decide, hey, this really isn't for me. Or yeah, I really like this and I see why these were losers and I see why these were winners. And sometimes a lot of times you can actually improve on your overall statistics of that strategy because you have A, taken a good enough sample size and B, taken notes and journal those trades. Trading mistake number seven, I see this quite a bit where someone will think that the more knowledge or the more analysis they do on a market, that's going to equate to more profit. And so I'll see people where they'll be doing a strategy and it'll be going really well and then all of a sudden they'll get into a little drawdown. They'll get into a period where that strategy isn't working and so they will either start to just pour over charts and do analysis or worse, jump to the next shiny object and abandon that one and go to something else and they think the more market knowledge or the more analysis that they do, that is their issue. But the reality is focusing on your mindset, listening to the trade hacker mindset podcast, reading Mark Douglas's book, Trading in the Zone or focusing on your own self-awareness when it comes around trading is a much better analysis to focus on than actually focusing on market analysis. In fact, I can't remember exactly where I saw this but it was a study done on actual market analysts and how terrible of traders they actually were when it came to a profitability standpoint. Market analysts are some of the worst traders there are. If you're a market analyst, let's say you're analyzing this small cap space or you're analyzing a specific sector, the technology sector or the utility sector and so all of your focus is on that sector. So supposedly you are very knowledgeable but that doesn't mean that you're going to be a good trader. In fact, many times that can actually work against you as a trader. We've all heard the acronym K-I-S-S, right? KISS acronym, keep it simple, stupid. Sometimes keeping your strategies simple, keeping your overall analysis simple is a much better way to succeed in the market than just overflowing your brain with analysis because analysis paralysis, right? You get too much information. Now you've got conflicting signals whereas if you just stuck to one set of criteria and kept it simple, you'd be a much better trader and that holds true for almost any strategy that you trade. And the last trading mistake that I wanna talk about, trading mistake number eight, loss mitigation, okay? So what do I mean by this? I see a lot of times, and this kind of goes back to the sample size. So the whole journaling and sample size point that I made just a few minutes ago will help with this but what I see sometimes is if somebody has a small sample size of trades, let's say they do 10 trades and there's supposed to be a 70% probability of winning but they have seven losers and three winners. So it's the exact opposite, 70% of their trades of their 10 trades have been losers. They start to look for reasons or they start to look for things of how they could have mitigated those losses. Now, don't get me wrong, trying to better yourself as a trader and trying to find ways to reduce losses or minimize losses is okay but it's when you try to mitigate losses that becomes the real problem for traders because remember, there is no way to avoid losses completely in trading. There are very high probability ways to trade so that your winning percentage is very high but you have to be able to accept losses and you have to be able to accept periods of time where you are going to suffer losses. So remember, minimizing losses is okay. Mitigating losses, not okay because it's not gonna happen. You're setting yourself up for failure if you think that you can create a strategy or do something with a strategy so that you absolutely mitigate any losses. It just, it doesn't happen. So that's it my friends, those are the eight trading mistakes that you must avoid. If you wanna learn more about our community just go to community.navigationtrading.com it's free to join. We have hundreds of traders interacting on a daily basis not only about the mindset stuff but sharing trade ideas with the sole purpose of helping each other become better traders. Go to community.navigationtrading.com We'll see you there and we'll see you in the next episode.