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Trader's Mistakes According to Dr. Brett N. Steenbarger, Ph.D.

In the trading world, mistakes often become an unavoidable part of the journey towards success. However, these same mistakes are frequently repeated, hindering progress, and even trapping traders in cycles that are difficult to break out of. To help address this, Dr. Brett N. Steenbarger, an expert in trading psychology, has identified three fundamental mistakes commonly made by traders.

1. Many Traders Struggle Due to Lack of a Valid Trading System 

A solid trading system forms the foundation for success in trading. However, many traders rely too heavily on psychological factors, such as a lack of discipline or patience, without realizing that their core issue is the absence of a valid system. Without a tested and proven system, traders often feel uncertain and hesitant when trading. They lack a clear framework for decision-making, leading to prolonged anxiety and doubt. It's crucial for traders to thoroughly backtest their trading systems so that they have a better understanding of their system's performance in various market conditions.

2. Switching Methods or Analytical Approaches Without Sufficient Understanding

Traders often try out new methods or strategies without fully understanding how to implement them in actual market conditions. This can lead to uncertainty and confusion, disrupting a trader's ability to make sound decisions. Dr. Steenbarger advises traders to maintain a trading journal to record and evaluate the performance of different methods or strategies, and then remain consistent with the one that best suits their trading style and preferences.

3. Succumbing to Negative Thinking After Experiencing Losses 

Losses are a natural part of the trading process, yet many traders tend to fall into negative thinking patterns after experiencing losses. They may become too fearful to take risks again or feel despair and frustration. It's important for traders to change their mindset about losses and view them as valuable learning experiences. Dr. Steenbarger emphasizes the importance of self-motivation and self-coaching, as well as developing a more positive and optimistic attitude towards trading.

By avoiding these mistakes, traders can improve their performance and become more successful in trading. With a valid trading system, consistency in implementing methods or strategies, and a positive mental attitude, traders can overcome the psychological challenges associated with trading and achieve long-term success.


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