What’s Your Greatest Weakness as a Trader?

I know our spread trading strengths and weaknesses change over time as we attempt to develop our strengths and tackle our weaknesses, but even so at any particular moment in time there are usually certain things that we are trying to improve.

The title of this post is somewhat misleading as instead of discussing our weaknesses we should put more emphasis on highlighting our past weaknesses and how we worked to overcome that. Knowing your weakness is your strength, but doing nothing about the known weakness is a worse weakness.

My biggest learning over these 3 years: Don’t overtrade, technical analysis does help tremendously to time entry/exit, don’t get emotionally attached to your shares, and don’t follow anyone advice when it comes to picking shares or timing entry/exits-  just do your own homework!

When I first started I knew how to execute a trade, but nothing about trading psychology, risk and money management or about building a robust trading plan, or the discipline required to maintain it. Unfortunately these things aren’t very exciting, but they’re crucial to being a successful trader

In my own case I believe one of the flaws at the present time is that sometimes I’m still guilty of overtrading and not sticking to my own rules.

Here are some other common spread trader weaknesses -:

1. Not following your own conviction with the consequence that you constantly get shaken out of good trades due to fear.
2. Overtrading is very common if you don’t really watch it. Some tend to follow a cycle of building their spread betting account for months only to give a hefty chunk back to the market.
3. Not keeping a good written trading log. Keeping good logs of trades is essential.
4. Entering trades just to prove to oneself that you can trade any market conditions! The consequence of this is that you again break your own rules and techniques so you won’t be able to maintain your edge. Your trading system will only work in certain market conditions.

Note: Knowing your inner strengths and weaknesses will also give you an insight of how you will react in a given situation such as in stressful market conditions when a spread trade may be going against you. This will help you recognise areas where you need to improve. Keep a trading record of all your trades and do go over them once in a while. Given time you may start identifying common recurring patterns when you are in a profitable trade versus a losing trade. You will then be able to analyse your results properly – identifying strengths and building on your weaknesses which will ultimately help you become a better trader and build on your long term trading success.

Day trading is hard. A thousand different traders all with a different system + a thousand different black boxes all with different setups. Nothing can possibly work all the time and its quite likely that about 50% of things will only work 50% of the time. That’s the mathematical probability of it. It is very frustrating and time consuming waiting for trades to come to you, so you go off searching for them and things start going wrong because you get emotional about it and start doing what you shouldn’t do.  It can be done but don’t think it is easy.  I read a blog the other day about a Pontoon (blackjack) player who won overall. His only system is that he had learnt the mathematical probability of winning or losing from each number he was holding. If he was holding say 18pts he knew that the bank has a smaller probability than him of making 19-21. He also knew the 50% probability number where he should hold or twist for an additional card.

You want to succeed? Have a good understanding of your trading objectives; why you want to trade, what you want to accomplish. Lastly, study yourself. Understand about your personality, time available, strength and weaknesses.

I received the following comment from a spread trader -:

‘I have banked the remaining money and will not spread bet until I really know what I am doing. I mean. I could do this FTSE intraday trading – spotting the trend lines and the supports…etc, with a tight stop and small bet sizes, say £10pp, but it is very risky still. And I am so down on the balance now, that its hardly worth starting again. I should really stick to betting only when I know the odds are heavily in my favour – and the FTSE100 is so prone to dive or rise on news that the investments houses find out about way before we as punters can – by the time we find something out, the market has moved against us. It is gambling, no two ways about it.’

You are probably betting too large a stake? You should have tried £1 per point. Logical decision making and clear thinking somehow become much more apparent with smaller stakes. As I’ve stated here many times before, when I used to trade larger stakes I constantly lost money – you don’t realise it, but emotions subconsciously affect your decision making. Once I was sitting in a large stake trade and could feel my heart pounding through my chest. I think that was a big part of the realisation that emotions were taking over.

The most common spread betting mistakes that new spread betters tent to make when they start include the following:

• Trading without any kind of edge or proven positive expectancy trading system.
• Trading against the wider market trend (for instance, taking long positions in Barclays when banking stocks in general are under pressure).
• Trading without a trading plan and without trading objectives.
• Using an inappropriate bet size (for instance, betting £10 a point on the FTSE 100 with an account of just £2000.