As traders, we want to outperform the market and be consistent in our performance. We want to be good at what we do all the time and we would like to have consistently top trading performance!
This is the main reason why we spend a lot of time reading and doing analysis on the market. As We have mentioned before, achieving consistent returns is not an easy thing. It is difficult and many people have tried and failed before.
Some of the factors that lead to significant losses in the market are well known. For example, not having a good trading strategy is a well-known factor that could lead to significant causes.
But some of these factors are often overlooked. In this article, we will look at some of the most overlooked factors that will often affect your trading performance.
Table of Contents
Drivers affecting your trading performance
Trading plan and strategy
The main overlooked factors that could affect your trading are a trading plan and strategy.
A trading plan refer to the process that you use to make entry and exit decisions. For example, a trading plan can involve using price action strategies like head and shoulders, double-top, and rising wedges. It can also involve using technical indicators like moving averages and the Relative Strength Index (RSI).
Other factors in this category include the chart timeframes you are using and how you are using leverage you are using to trade.
Related » Leverage: Risks and rewards
Overconfidence
This is probably the leading factor that makes many traders fail. When they make trading decisions, they become so overconfident that they are not willing to change their decisions.
For example, a trader will buy a currency or a commodity and when the thesis fails, instead of exiting, they will continue to hold it. Of course, this does not happen to small-time traders alone: we have seen it play among big hedge fund managers.
For example, David Einhorn made an investment in SunEdison. The company performed poorly and instead of him exiting the trade, he held on into it. Later, he lost all his money when the company declared bankruptcy.
Related » Top mistakes to avoid as a Trader
Fear
Fear is not good in any profession especially, in trading. When you open a trade, you want it to be successful. But, before it achieves this success, chances are that it could move down.
To succeed as a trader, you want to be able to hold on to the trade even when it goes south without fear.
Related » The loss aversion bias explained
When you are fearful, you will close the trade before it matures. To prevent fear from taking over, we recommend that you always have a stop loss at a place where you are comfortable losing money.
Psychology
Psychology is another overlooked factor that could affect your trading results. It refers to factors that go on in your mind and how they affect your decision-making.
For example, if you are stressed up, it could compromise your thought process. Similarly, if you are extremely excited, especially after a big win, you could make mistakes.
Some of the top psychological items to always consider are fear, greed, and FOMO.
Trading device
Unlike in the past, all trading these days happen electronically. In this case, most people use their smartphones to conduct analysis and execute their trades. Others use their laptops or desktop computers to execute trades.
The device that you use will always have an impact in the market. Ideally, you want a device that is extremely fast and one that does not have any issues.
Fortunately, many budget smartphones have fast speeds and are incredibly effective. The same is true with computers. Therefore, always ensure that you use a good device.
Internet
As a trader, you want a good access to the internet. You want internet that is fast and reliable. Having an internet connection that does not meet this criteria can be what separates you from being successful.
Essentially, you want an internet provider that is not very expensive but one who is reliable. For example, assume that you have just opened a trade and then the internet goes off even before you set up the stop loss. If this happens, chances are that you will lose your money.
We recommend that you subscribe to a good internet and then have a mobile app as a backup.
Power
As a trader, you want to have the best source of electricity. You want power that is reliable and one that will not fail you. However, if you rely only on the power of the grid, chances are that you will often have outages.
Assume that you have just opened a trade and then power disappears. If this happens, chances are that you will lose money.
To prevent this, we recommend two things:
- Buy a backup generator that will run automatically when power disappears.
- Alternatively, buy a powerful UPS to backup your power.
The Trading Office
The office that you trade in is very important. It can be the thing that separates your success and your failure. Most traders start trading in their bed rooms which is good. But as you grow, you will want to let your trading office grow with you.
Essentially, you want a trading office that is conducive, silent, and away from distructions.
Other Useful Tips to save up Your Trading Performance
- Analysis of Key Drivers of Trading Performance – London’s global university
