Learning how markets work is accomplished through time and experience. This is invaluable to the trader or investor. Determining what type of trading environment one is in, such as a trend environment versus a range environment, is important. Recognizing the subtle symmetry in all markets is an absolute prerequisite for a pattern recognition trader; this is done only one way: practice, practice, and more practice.
Why Traders Succeed
Solid knowledge and understanding of the markets they are trading.
Technical expertise on how to trade their markets.
A sound trading methodology with a proven edge.
A trading plan based on the methodology.
Thinking in terms of probabilities, rather than emphasis on the outcome of any one trade.
Good money management; adherence to money management rules.
Having mentors or seeking out experts and peers to gain trading knowledge.
Assessing risk first, profits second.
Employment of a set of trading rules.
Foundation of daily routines, including mental preparation.
Use of stop-loss protection.
Maintenance of a high level of confidence and a positive attitude.
Commitment to the process of trading.
Taking 100 percent responsibility for each and everything that happens in their trading.
Being in the habit of forgetting their last trade, win or lose, and moving on to the next trade.
Why Traders Fail
Conversely, we also see particular reasons traders fail. We would like to share these observations with you in the hope you can learn from these errors and avoid some of these pitfalls. An ancient proverb states, “The smart man learns from his mistakes—the wise man learns from the mistakes of others.”
Lack of knowledge; traders enter the business constantly without a solid understanding of what the business of speculation involves.
Lack of capital; small accounts typically lose money. Those few with smaller accounts who do succeed eventually hang on until they understand how leverage can be friend or foe.
No trading methodology; they use a seat-of-the-pants approach.
No trading plan.
Failure to apply a solid money management system.
Not seeking help from experts or mentors; not wanting to invest in an education of trading.
Lack of understanding of the inherent risks present in trading.
Failure to recognize the mental preparation necessary for successful trading.
No trading rules applied.
Altering a sound trading plan; early entries, early exits, moving stops, not entering trade setups.
Random trading, which is trading anything outside of their trading plan and is usually emotion-based.
Failure to develop the discipline necessary to trade successfully.
Not learning from previous mistakes.
Lack of commitment to the process of trading.
Failure to use stop-loss orders, which is the number one way to turn a small loss into a large loss.
Some of this comes from the book, TRADE WHAT YOU SEE. I recommend you read this book.