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I've been thinking a lot lately about what it takes to achieve financial & investment success. As a teacher, I have students at every stage of the process - from those who are completely new to the trading process to students that have gone on to become millionaires thanks to the lessons I teach.
I never guarantee success with my trading curriculum, because I don't make trades for my students. I teach them the lessons I've learned and the chart patterns I trade, but then it's up to them to choose what stocks to play and when to enter and exit their trades.
Since everyone's path is different, as a result, I have some students that have been wildly successful and others who have racked up major losses. Students don't lose because of my system, they lose because they break its rules. But I've always wondered, what is it that makes some of my students profitable while others can't seem to adapt to the system?
In fact, the answer may be as old as the Bible itself... Here's how the seven deadly sins can take down even the most optimistic of trading students:
Greed
Greed is absolutely one of the biggest sins that results in stock trading losses. One of the things that I'm constantly telling my students is that you have to wait to trade until you see the plays that meet the patterns I teach. If you try to trade when the plays aren't there, you're almost certainly going to lose.
But what do many beginning traders do anyways? They get greedy. They see the lifestyle I'm living and they want it for themselves - right now, without putting in the hard work I've invested to get where I am today.
The result? They force trades and they wind up with big red losses on their records. I don't care whether you're an advanced student or a total beginner, greed can take you down. Identify it as soon as you can, before it has a chance to influence the trades you make.
Lust
For the purposes of this article, we're going to think of lust not in terms of "boy and girl" lust, but as an intense, uncontrolled desire - in this case, for money.
When you want money so badly that it's all you can think about, you'll do anything to get it. And, more times than not, that involves putting yourself in a risky, untenable situation. If you don't carefully mitigate your risk as a trader, you're simply not going to be in the game for very long.
There's nothing wrong with wanting money or wanting better circumstances for your life. Just don't let that desire become so intense that you're willing to compromise the stability of your trading accounts for it.
Sloth
I've said it before, but making money is easy for me. You know what's hard? Finding students who are dedicated and willing to work hard.
I'm at a point now where I'm experienced enough to be able to trade when I feel like it, from wherever in the world I am. But when I was first starting out? I spent hours and hours sitting in front of the computer, crossing my eyes over stock charts until things started to make sense. I ground it out - each and every night - to get where I am today.
I see so many students today that just don't have the discipline to work that hard. And it's sad. If you want big things, you have to be willing to put in big effort. Don't let sloth stand in the way of your success.
Wrath
Stock trading - even the more volatile penny stock trading - is, at it's core, a numbers game. Ultimately, a stock's value is measured in its price action, not by what people think of it or what they hope it'll achieve.
When you start to bring emotions into your trading, things get messy. Say you've just taken a loss. We all do it. Taking a loss really isn't a big deal, as long as you know how to move on without letting it affect your future trades.
But say you get angry - really angry. You were sure that trade was going the other way! And now you've wiped out six months of profits on a single play! This kind of wrath is understandable, but if you carry it forward into your next move, you put your whole portfolio at risk. When you trade angry, you'll do anything you can for a profit. That means forcing trades, hanging on too long and taking other negative actions that put your positions at risk.
Having anger after a loss is okay - it's natural. Carrying that wrath with you into your future trades, though, destroys ability to profit.
Envy
Remember earlier, how I mentioned that greed will mess up your trades? Envy will do the same thing.
I don't brag about my luxury vacations, my mansion or my Lamborghini because I want to show off. I do it to show you what's possible - what you can have if you're willing to work hard. But I get that seeing pictures of the hotels I've stayed at, the meals I've eaten and the beaches I've worked from can make people jealous. Envy creeps in when you see that I have something you want.
But you know what? You can have all those things too. You don't have to be jealous, and you don't have to let envy get the best of you. If you can defeat our enemy sloth, there's no reason my lifestyle can't be yours as well.
Pride
Next up, there's pride. This is a big one I see in my students, and it's one of the most deadly sins to traders. Usually, it looks a little something like this...
You've done your research and identified when you'll get into and out of a stock. The signals all line up, so you buy... only to watch the chart reverse course and move in the opposite direction.
If you know me and you know my trading style, you know that I'd be out of that play as soon as things went a different way than I expected. But for many others, pride turns this common situation into a bad one. You're so confident that you're right that you're unwilling to read the signs as they lay and get out of a bad play. You're ultimately going to take a loss (few penny stocks rebound after a major loss), and it's going to be your pride that's to blame.
Gluttony
Most people think of gluttony in terms of overindulging, but in Christianity, gluttony becomes a sin when the excess desire for food keeps people from giving to the needy. I see this all the time with traders who are so focused on their own material wealth that they never give back to their communities.
I've made 2015 my "year of giving," and it's been eye-opening to me how much of an impact even small charitable donations can have. So while you won't find any arguments from me on how fun it is to accumulate wealth, I'll also caution you not to become so self-involved that you forget about helping others.
Making money feels great, and giving it away feels even better. Don't let gluttony keep you from enjoying this tremendous benefit of being rich.
Can you ever realistically avoid all of the seven deadly sins of trading? Of course not. Traders are human, and that means we're prone to making mistakes.
But learn from this list. The better you get at spotting the impact these sins are having on your trading, the better off you'll be in the long run.
Have you ever fallen victim to one of these seven deadly sins? Share your experiences - and how you recovered - in the comments section below: