What if I told you that mistakes make you a stronger trader?
It’s a simple fact that as a trader, you will make mistakes. You’ll hold on to stocks too long, sell short too soon, or commit any number of other errors. It’s inevitable and a fact of life: there are just too many factors to get it right all of the time.
However, in this fact there’s also freedom. Once you accept that mistakes are going to happen, you can make a conscious decision to use them to your advantage and learn from them in order to become my next Millionairestudent!
I know it’s tough to believe so below I’ll detail several ways in which mistakes make you a stronger trader.
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1. Avoid making the same mistake twice. Consider the age-old story wherein a mother tells her toddler not to touch the stove. The toddler doesn’t listen and touches the hot stove, and after that moment never disobeys the mother’s request again! Sometimes, the experience of making a mistake can really cement a lesson in your brain.
In trading, this is very true. You’d better bet that when you make an error that results in a big monetary loss, it’s going to sting in a way that’s equivalent (if not physically) to touching that hot stove. Once you’ve been burned, you’ll be extremely wary of making the same mistake again.
2. Learn how trading really works. As a trader, when you make a mistake, you can actually begin to gain a better understanding of how penny stocks actually work. This is part of why I urge my students in the Tim Sykes Million Challenge team to start small. It hurts less to learn from small mistakes!
A mistake isn’t just choosing the wrong stock and losing money. It can be a matter of being too cautious, too. For instance, say that you sell too soon and could have made a lot of money on a trade if you’d held on longer. This mistake is going to teach you a big lesson about being patient and brave. It may prompt you to pursue further studies on the arc of a trade or how similar stocks have performed in the past. History doesn’t always repeat itself to the letter, but it echoes enough that you can make more educated decisions about how to treat different stocks. In this way, these mistakes make you a stronger trader by prompting you to learn the ways of the market.
3. Mistakes are humbling. In my career, I’ve had moments of arrogance or believing that I couldn’t fail. Usually, this is exactly when I’ve experienced big losses. Making a mistake can cut you down to size. This isn’t necessarily a bad thing. The fact that mistakes are humbling can bring you back to the real world and keep you from becoming overly confident in your investments. It can also prevent you from becoming lazy about doing research. A mistake can bring your focus back to intelligent trading.
4. An opportunity for integrity. Successes as a trader are incredible. However, mistakes can be very revealing about your level of integrity.
It’s easy to take credit for a big success and soak up the accolades. It’s far harder to own up to your mistakes. However, it’s important to take responsibility for both the good and the bad. This is a strong sign of your integrity and strength as a trader. This is a lesson I try to ingrain in students of the Tim Sykes Millionaire Challenge.
5. Increased risk tolerance. You might think that making mistakes would make a trader go hide in a hole and avoid risk for the rest of their career. And true, for some traders this is the case (there’s a reason why many new traders fail and lose money, after all). However, it doesn’t have to be the case. Actually, if you approach your mistakes from a clinical point of view, they can actually help you increase your risk tolerance.
How so? Well, it’s a combination of education and honing your instincts. For example, say that you make a risky trade that’s outside of your comfort zone and you suffer a big loss. Immediately, you’re going to have a lot more respect for taking that type of risk next time, and are likely to do more thorough research. This can increase your risk tolerance by making you more confident in your trades. As noted above, history doesn’t repeat itself exactly, but close enough that you can learn from the past. By evaluating where you could have done things differently, you can mitigate your risk next time.
6. You’ll be more driven to succeed. If you’re always winning, you will eventually lose perspective. While it may sound funny upon hearing it at first, mistakes can actually make you a lot more motivated to succeed.
In the long term, this can be a way that mistakes make you a stronger trader. If you begin to take success for granted, you will lose the drive to continue improving. When you make mistakes, it can tend to make you hungrier for success, so that you continue striving and improving your methods.
7. Successes will feel better. Success generally feels good, but it’s even better when you have seen the other side of the coin. After you’ve made a few mistakes and suffered a few failures, you’ll really begin to appreciate your wins and earnings when they come. Because you’ve known the alternative, success will feel even sweeter.
8. Mistakes give you direction. Mistakes can actually aim your career in the right direction. If you keep on making the same mistakes short selling stocks, then this may be an indication that you need to either switch gears with how you’re approaching trading, or to go back to the drawing board and keep learning more before you continue trading…test, test, test, optimize, optimize, optimize~
By focusing on your education and continuing to follow the guidance that your mistakes offer, you will become a stronger trader and strengthen your knowledge foundation that will lead to more profits down the road. Ultimately, mistakes can help you learn what you need to enjoy a long and successful career as a trader and that’s my goal for every one of my students so instead of dreading mistakes, accept that they will happen and utilize them to catapult yourself forward in the stock market and in life too.
Now I’m not saying purposely make mistakes just to learn as nobody likes making mistakes; however, they are an important part of being a trader, and in the long run, they can actually be your biggest and best teachers. By learning from your mistakes and letting them guide you toward improvement, your trading will improve and your earnings in kind.
What mistakes have you made as a trader? Be honest and leave your comments below so I can help you fix them in the future!