Wall Street trader explains: #1 reason WHY traders lose! (and how you can ALWAYS win)

The three biggest mistakes in trading. Stop doing them or you will never become a successful trader. I generated this video together with my friend and experts with scalper Serge Hoffman, and we will give you a very deep explanation how you can change everything if you want to do it and you want to become success. You have to understand how the big players at the markets in hedge funds, for example, are working and that they don't do everything by themselves. But we retail traders have to do everything in one person. And you will find a lot of nice things in this video which are very helpful for you to understand what is the story behind and how it helps for you. I think you will love it and we translated it with AI because we are not the perfect English speakers, but you will like it. Trust in me.

A wonderful hello to everyone today, together with my dear friend and colleague, Serge Hoffman. Today we want to tell you about the three biggest mistakes in trading. And since dear Serge learned trading from the ground up back in America and I took a completely different path, it's actually quite funny, maybe also interesting for you to hear how we each see things and how different our journeys have been. And we simply want to share with you what will help you reach your goals, in what order you might want to learn trading, and which mistakes you should definitely avoid. Serge, what is the biggest mistake in trading?

The biggest mistake? Yes, when you talk about it, you can go straight to the biggest mistakes. Actually, it's discipline and routine, not having a certain plan or structure and the depth with which you approach the whole thing, the routine you bring to it, so to speak, that you also set aside time for it when you trade, when you learn, and that you actually write everything down, that's really the biggest mistake. But in between there are also some bigger mistakes, you could say. And that actually already starts with something that many people don't know, which I find is one of the main issues. I don't know if it's the same for you. For example, setting stop losses is also one of the biggest mistakes. People say that the big players hunt stops, but that's actually not the case. But if you look at the psychology of people or the participants, you simply realize that the biggest mistake is that most stops are actually placed at certain levels, like round numbers, for example. Many traders use round numbers as stop levels as well as major highs, extreme highs. Everyone knows if you look a bit deeper into the market, for example, the footprint chart, there you can see a sudden movement and you can see that such a stop wave was triggered.

But there isn't Really a continuing institutional follow through. But you get the impression that there is, and we'll talk about that in more detail.

So the first point regarding stop loss is that many people set a stop loss ma mathematically exactly. And they simply say I always take 20 points in the DAX or I always take $3 in the S P. That's complete nonsense. Because in my opinion a stop loss always needs a foundation. That means a stop loss should always be placed where I expect the opposite of what I'm currently trading to happen. And in my view, that's mistake number one, that so many people position and place stop losses to limit their risk. But the logic behind it is completely senseless. What good is a stop with 20 points if the market can still be bullish at that level? When I'm currently long, that doesn't help me at all. But sometimes a stop loss with seven points is very valuable because I can see that below that it's probably going to break. And I think that's absolutely essential.

I see it almost the same way, just with a small, small difference. So I'll just tell you how it was for us. We were always taught not to set any stops at all, which by the you really shouldn't do here if you don't know what you're doing. Because that's what I did earlier since I knew what I was doing. It's just like this.

So as people say, usually if you look closely, there really isn't a clear place where you can properly set a stop. It's also okay to sometimes set a stop at the top, even with the risk, but you have to do it in a certain context. So that means you don't just set it randomly just because you feel like it's always 20 tick stop in the DAX. That doesn't make any sense. In a certain way in a specific context at a particular location, you can set it. And that's exactly the point. This is where discipline comes in. You can't Always use a 20 tick stop if you're not disciplined enough and don't follow your routine plan and say if this and that scenario happens and I'm at this or that location where the probability is high enough that the 20 point stop will hold, then it's okay. But as I said, most institutional traders in day trading and in very short term trading don't set any stop at all and exit manually. When they see really in the live market that the market is now moving against them or something like that, and then they just get out right there. That's the institutional logic for them, because they've always been trained that way. So for me, whenever I always set a stop, I always got stopped out. And the market never went the way I expected. It always just bounced back in the same session. Yeah, you always set a very tight stop stop. And you should actually avoid setting such a tight stop. You exit manually when you see that it's necessary.

So that's really the absolute core issue here. Number two is discipline. Exactly. Yes. So I'll just put it like that. And I think you see it the same way. Many people just can't do it because they hope and worry when they're in the market, and when the market moves against them, they can't immediately realize their losses. And I can say, yes, I've done that plenty of times myself. I could watch for days, even weeks, as positions went into the red simply because I was convinced I was right. But in reality, it was my ego that kept me from closing the position. And that's where we are. Discipline can actually be trained. And you have to train it to get the synapses in your brain back to a level where things just flow.

And I have to say very clearly, without discipline, it will never work, especially in trading. It's routine, as you said. And then, of course, it's also about having the discipline to implement everything correctly. How did you become disciplined? How did they do that with you?

How was it done with us? Actually, it wasn't really done. It's more of a personal effort. You really have to work it out for yourself. Actually. Truly, it's not like someone just tells you, just recite it for me. That's just how it is. We were told like you were with me. Please sit down. Focus on the time and sales or the price ladder and see what you notice this. And please write all of that down. No matter what you think is important for you, write it down. That's already the first step. That's really where you have to start. A lot of people just sit there watching and getting bored, and what do they start doing? Looking at their phones, because nothing's happening at the moment. And that's the way I learned it myself. Back then, when it all started, I was really curious. I just wanted to know how the whole thing works. I was really curious. I'm naturally a very curious person. Yeah. And so for me, it was also a kind of curiosity. And that's why I really did it consciously. And I really told myself during that time, hey, now, sit down for an hour. Watch and write down every Silly thought, whatever. I think it doesn't matter to me whether it's right or wrong. But I wrote down every single thing just like that, simply. I even sketched movement in my mind and put it on paper. And everyone did it their own way. But for example, a strong quick movement from 12 to 13, something stopped. And stories like that. And I did that with discipline for myself. No one really teaches you that unless you come to our office and sit next to us. And then if things aren't working, we'll smack you on the head with a wooden spoon. Then maybe it'll work too. But discipline is really something you have to take for yourself. Take the time people to set up a plan like that, really, just like that. A daily or weekly plan, or even better, a five year plan if you really want to get started. And where do you want to be in five years? What do you need to achieve those five years.

To reach that goal in a month? The goal. So what does that break down to break it down to reach the monthly goal, what does each person have to do every week? And to achieve the weekly goals, what does each person have to do every day? This is the kind of discipline where you establish routines for yourself and that's basically how you can do the whole thing for yourself. That's how it was for me too. That's how I picked out a plan for myself.

In the end, it's just like in university. So it's like if you're from Germany especially, you go to school and everything is laid out for you, and then you go to university and suddenly you have to be completely responsible for yourself. And who manages to get a proper university degree? Only the people who realize now I have to take responsibility for myself. I have to do my work with discipline and I have to tackle it in a structured way. And it's exactly the same in trading. That's where the wheat is separated from the chaff. If you're not able to do that. And in my opinion, there's another huge topic here, which is letting your profits run. That means many people limit their profits because they're just glad it's finally over. And the question is, how did you deal with that? How did you let your profits run in scalping? What kind of mechanism did you use for that? Or did you not do it at all?

So really letting profits run. Well, for us, it was always like this in scalping. It's really a completely different world compared to day trading or position trading. You do scalping so directly and pay close attention. If Something happens somewhere, whatever it is, you have to react right away.

And if it's rotating for you, do you let the profit run?

Yeah, sure. Then you let it run for you. In day trading, for me it's just like that. I'm also not really someone. Honestly, I don't have the discipline to hold positions long term. I have to admit that it's just not for me. Or maybe that's also a kind of discipline for me. It's simply set up partially semi automated systems where the stop is automatically trailed by the market trigger. That's a specific approach. For example, when a trade of mine reaches a target of three to one, the stop gets really tight at a target of three to one. So already at that point it's set to three to one. And either it works out or it doesn't. But that's just how it is for me. I can't really watch it for that long because that's how I've been conditioned unfortunately. Sometimes that's good, sometimes it's bad. It's just that I have to react to the market. If I see something, I have to respond to it and accordingly, that's my discipline to let it run. I enter the trade and the rest is handled by the semi automated system and I simply switch to another market because it's simply the way it works out for me.

That's actually smart because that way you're not limiting yourself.

Exactly.

A lot of people can't take their focus off their trade at all because they're so caught up and attached to it with that one position, they're not even free anymore to do other things. And only then can you, I mean, you can really just switch it off and move to another market. Yeah, I can do that. But that's also a big question that works really well.

You can do that. So in that case it really does work. And as you already mentioned, I also think it's such an important point to let things run because the psychology of people, however it is, it's interesting when you watch people observe them, even when they're co traders or involved in coaching or mentoring, it's always like this. People are always willing to close their trades quickly because their P and L is looking so nicely green at the moment. So, oh, I need to have a sense of achievement because it's green right now. But when the P and L turns red, those thoughts always come up like, oh, I have a stop here soon, maybe it can turn around. I do have a fixed stop, maybe.

It can recover, but that's just human psychology. And it's really simple. What I have, I have. No one can take that away from me. And in trading, it's always like this. A good friend of mine always said trading is like doing a headstand. You just have to turn everything upside down to get your emotions under control. That means when losses come, take them immediately and don't wait for things to get better. And when profits are running, let them keep running, because the probability that this will work out for you mathematically is simply much higher. But let's go through a routine that in our opinion, makes sense. I can briefly explain what in my view is very, very mindful in order to take the right path. The first thing is to get up in the morning and check in with yourself. How am I feeling? Am I feeling good? Or is there maybe some tension or mood swings next to me in bed? Then sometimes it's better to go do some exercise first. Second thing. Yes. Clear your body and relieve stress. The third thing I do is I really have to organize myself well in terms of how I structure my trading day. That means planning phase, preparation phase. It's essential to do that really well. Once I've planned everything, it's time to put it into action and turn this LEGO building into Lego playing. My daughter, she's really good at that. But out of my five kids, she's the only one where I can clearly say, first she builds a huge Lego house and then she sits down and plays with it for hours. And I know only very few traders who can do both. And when you finish playing, then you also have to take the building apart and put it back together neatly. It's no different in trading than going and saying, after a terrible day, I still very disciplined, I finish my journal. And only if you take these steps for yourself will it work out in the end. Maybe just so you get an idea. In a real hedge fund. So in a hedge fund where actual trading happens, not some small time operation, it works like this. In these hedge funds, there is a risk manager, there are analysts and there are traders. That means there is someone who makes sure that the traders never go overboard. There are people who are highly intelligent and clever who tell you exactly for the day, the week, the month, very clearly from here to there. That's where you look for your trades. And then there are the traders who are just firing away all the time. That means everyone can focus 100% on their own area of expertise. In retail trading, we're led to believe that you can easily do it all by Yourself. And it's not easy at all. And we're a big team and it's great that it is this way because we can support each other in our strengths and weaknesses. Serge is the one who's always developing and coming up with new ideas and so on and so forth. Carsten is the one in our team who prepares things in a super structured and disciplined way. And yes, I'm more of the artist type, the one who goes out into the market and gets into the flow there. And that's just very different for everyone. Then there are people like Patrick who are doers. They can just get things done without overthinking it. It's really, really, really different. And that's exactly how I experience it with us too. And so maybe to mention a fourth point, even though we only wanted to name three, you have to build something for yourself that you actually enjoy.

Exactly. That's very important.

And I think it's also nice to hear. When do you really feel joy and what brings you joy? Joy in trading, probably something like long term commodity trading at 27, right?

No, that's crap. Actually, as I said, I found out for myself, I'm also the type, I'm always so quick. I'm usually very quick too. You know, when it comes to little things in general, I talk fast. And that's why I actually like the fast reactions in the market. And that just gives me joy.

And loud.

Loud, yes. I just love being right there in the market. I love seeing the reaction, I love seeing the movement. And above all, when the markets really go crazy, where many people think, well, I like that. And that's where I found my passion and I really found my own style where I just feel very comfortable. So as I said, I'm not really the investment or long term trader type. I'm more into day trading, more into short term trading, especially when the markets are really lively. And that's what I really love. And I could talk about that for hours about the markets and even talk to myself about it. And that's where I found my passion. And everyone should find their own passion in what they like. So there are also people who I once started with slow markets, but by now they've become too. Gradually, I lost my passion for them. That's why I discovered new markets for me where I can really get fully involved again.

But that's not been the case for very long yet. Let's be really clear based on facts. Let's say what are the three biggest mistakes? The first mistake is not using a Consistent strategy. The second mistake is lacking discipline. And what was the third mistake?

Actually, I think you can add that to discipline. Even with a lot of discipline. It's really just about making sure to write everything down. Keeping a detailed journal of your thoughts, thoughts and experiences.

I would say the third mistake is not having a strategy that suits you.

That's true.

That's, for me, the biggest mistake.

I was going to name number four.

Yeah, but it's unbelievable. People are often told, look, this is how I trade, and now I'm giving this to you and you'll make money with it. Works great for the two of us.

Exactly. No, that's true. So you really have to figure out for yourself which direction suits you and what you're really good at. Definitely. Because then you'll also enjoy it. And it's just like when I'm out with friends sometimes and they're always complaining about their jobs, which they don't like. And that's why they complain, because they just don't have any passion for it. And it's exactly the same here. You have to figure out for yourself what type of person you are and which strategy you use, which setups and which markets. That also makes a big difference.

You're more of a very rational type, a very mechanical type, and still super fast. But honestly, what do you think of this psychological building block I've integrated into this world? Do you think it's cool or would you use other approaches for yourself?

Well, I don't think it's bad. I mean, it's a good starting point if you really don't know where you are. But there are also people who already have some idea of where they are.

Then maybe it's even. I don't know. How should I explain it? So when it comes to me, when it comes to psychology, I'm the kind.

Of person who is really blunt.

Blunt, exactly. Yeah. And for me, it's just like this. I can tell you how it is for me, there was always this mindset thing. What is mindset and all that. I've spent a lot of time dealing with it also for myself. So for myself, with mindset, and for me it's just like this. I always look back at how it was for me when I first started out. What was it like for me back then, when I was still really young and all that, the full, complete, 100% passion I had in the beginning, that was just it for me. First, the curiosity that brought me to trading in the first place. Then of course, the hunger, as always.

And when things really started to take off, a lot of people said, yeah, over there, mindset is important. Mindset is important. You'd hear things like that, especially among all the guys and so on. But for me, it wasn't really like that. That mindset comes first. For me, it was really about this joy. Joy, exactly. The joy and the passion. And at some point, your mindset automatically changes when you start seeing your first successes, see them. And that's what actually changes this whole mindset idea. That brings us to your approach now that you have to find out which type someone is. And I think that's good, because that way you also achieve those first steps of success when you see, oh, I'm this type, and this way of negotiating suits me. And when the successes come, the mindset changes right away as well. Of course, if we keep using the wrong strategies or wrong approaches all the time, you get that negative feedback from the market. Whenever you lose or do something wrong, obviously your mindset shifts in a negative direction, and that's it. Many people also simply often cling too much to the principles they've learned somewhere. That's it.

It's a reference to the past that you just can't erase. Mindset is really about focusing on what you want to achieve, where you want to go. Neither is good.

What's good is to set goals for yourself and say, my path to get there is open.

So I do my job as well as I can. I have passion and joy in it. But when I've walked this path and achieved something I wished for, I can't let my thinking stop there. Instead, I have to always stay open in this process, open to new things. And that's something. I have a dear friend who always had a goal. I think it was 5 or 10 or 20 million. And after that, he fell into a deep depression because he did everything for it, worked hard to achieve it. He achieved it, but afterwards he felt terrible. And I think it's really important that as a trader, you set yourself clear goals in trading, but that you also free yourself from them. That means don't bring stress into it. And then you'll realize in this process of development, things always turn out differently than you expect, and new things arise, new people cross your path, and so on. But all right, let's quickly sum this up for us. It's really important. I'm speaking for both of us now. I hope that's all right. If you're working in this field of trading, do your studies now. If you're not disciplined, we can tell you how it works. Secondly, if you really want to be lazy, then use this. Still, please just use a simple piece of paper and write down all your trades. If you don't feel like dealing with huge Excel spreadsheets and all that, just write it down. Make it a big thing. It will help you write down different strategies separately, so track them separately as well. You'll notice that in counter trading, trend trading or whatever, scalping, you'll use different parameters. That helps you too, to figure out what actually works best for me. And then to be able to just call it a day when things are going badly and say, okay, today's not my day, I'll continue tomorrow. And then I'm good. And last but not least, stop moving your. Stop losses. That can really turn out badly.

Yeah, that's true.

Yeah, that's my final word for today. What about you?

My final word. Keep it simple. And don't. How do you say it? Keep it simple. Don't be stupid or something like that.

Don't be stupid.

Don't be stupid. Yes, exactly. That's really how it is in the markets. Don't be foolish in the markets. Stick to your plan. And in other words, be disciplined.

Serge, thank you very much. I hope you enjoyed it and we're really looking forward to answering you the next questions. Thanks.

Thank you.