8 TRADER’S CAPITAL SINS

There are seven capital sins: pride, avarice, envy, wrath, lust, gluttony, and
sloth. A trader’s capital sins would number eight because you have to add
fear to the deadly list.

Pride.
Overconfidence is one of the biggest causes of bankruptcy in
FOREX trading. You think that you know it all, you risk a little
too much, you win, excess of confidence is reinforced, and
suddenly you lose grip on an unexpected market reaction because
of the cloudy vapors of glory stemming from your ego. You will
need to continuously criticize your strategy with perspicacity,
keep studying the market as it changes continuously, and always
find out the cause for the outcome of your trading.

Avarice.
Greed or excessive and unrealistic ambition is, in fact,
caused by a subconscious fear. It is impossible to become rich in
a week without making an effort to learn and investing your own
time, hard-earned money, and dedication. There is no free lunch,
and you will have to be persistent at acquiring the necessary skills
if you want to succeed.

Envy.
Some traders are always comparing themselves with other
apparently more successful traders, trying to copy their strategies,
clinging around to get their trading calls or signals, and asking for
directions. Always doubt that anyone has really found that elusive
Holy Grail. Analyze by yourself, use your own common sense,
and develop and build your own system. It will save you a lot of
money in the end.

Wrath.
Anger and revenge will cloud your judgment. You feel that the
market is against you, price always moves in the opposite
direction of your trade, and your broker is after you and wants
you to lose, hunts your stop losses, and separates you from your
money and potential profits. Watch closer: If price is always
going against your trade, most probably you simply made a
mistake. Assume your losses, wait for another opportunity,
reinforce your discipline, and above all, do not try to get even or
revenge-trade. This is the best way to lose even more and faster.
Refine your money-management rules, reduce your risks, and correct
the flaws that your system could have. This is the only
way to recover and win in the end.

Lust.
The ultimate technological gadgets will not help you to advance
a millimeter in your trading career. Worse, excess in any field can
be counterproductive. Too many screens and too much time
watching the charts lead to stress and anxiety, eye strain, and a
state similar to hypnosis and delusion. You will begin seeing
nonexistent signals, or you will be paralyzed and fascinated by
screen movement when it is the moment to act. Never spend more
than eight hours a day watching your computer monitor; if you
trade and analyze full time, it is even better to make several small
pauses during the day because a focused activity has a relatively
short time span, something around two or three continuous hours,
maybe even less. Stay healthy. If your health declines, you will
not be able to apply your methodology as well, and the odds will
start piling against your success. Your ability to manage your
screen time and overall daily life schedule efficiently will
determine your success or failure.

Gluttony.
 Respect your stops. Take profits with prudence and
intelligence. You can never catch a complete rally. Not all trades
will be winners. One pip more can become 50 pips less.
Sloth. Nothing happens by chance. Gambling is not trading. You need
to design a plan and trade following its rules. Barely using vague
hunches or intuition or other people’s random calls is the same as
tossing a coin—heads or tails, bulls or bears. The only path to
success is through a methodical and systematic approach.

Fear.
Fear is paralyzing. But you can use it to your advantage! Employ
the fear emotions to help you get out of trades much sooner. You
risk not being able to trade another day! Control the fear, and
make it work for your benefit.