Have you ever sat at your computer feeling frustrated, greedy, or angry, and then entered a trade you knew was a bad idea even before hitting the Buy or Sell button? Almost as if you sensed the trade was likely to fail, yet couldn’t stop yourself because some “trading demon” had taken control of your mind and body?
If so, you’re not alone. Every trader experiences this at some point. The key is identifying what’s driving these impulsive trades so you can prevent them from happening again. The brain is powerful and complex, and once it’s flooded with emotions, it can feel almost uncontrollable—as if it has a mind of its own. That’s why it’s crucial to cut off the potential for emotion-driven trades before they even occur.
You don’t value your profits enough
In economics, there’s a concept called loss aversion, which describes our tendency to strongly prefer avoiding losses over acquiring gains. Studies suggest that losses are psychologically about twice as powerful as gains. In practical terms, losing $100 feels far worse than gaining $100 feels good.
So how does this relate to making “stupid trades”? Simply put, it explains why, after making a nice profit, many traders fail to properly value their winnings. This lack of appreciation can lead them to rush back into the market, chasing more profits, and taking unnecessary risks.
If you’ve traded a live account, you know the pattern: a solid winning trade is often immediately—or shortly thereafter—followed by a loss. These “stupid losses” usually happen because you acted out of greed, trying to grab more profit before appreciating what you’d already earned. This cycle can persist for years if not addressed. For a deeper dive into breaking this habit, check out my lesson on Finding Your Forex Trading Mojo.
In short, failing to value your winning trades is one of the main reasons traders repeatedly make “stupid trades.” Take the time to reflect on each winning trade, truly appreciate it, and remember that your profits can vanish quickly if your next trade is made in haste.
You let losing trades impact you too much
As I mentioned earlier, loss aversion—a concept from economics—explains why humans tend to feel the pain of losses far more intensely than the pleasure of gains. This not only explains why traders can make reckless trades after winning, but also why they often make poor decisions after taking a loss.
Trading can make it feel as though your brain has a “mind of its own,” and that’s not far from the truth. What’s really happening is your fight-or-flight response kicking in. There’s no faster way to flood your mind with fight-or-flight emotions than losing money you can’t afford or losing too much on a single trade.
Every trader has a breaking point—an amount of loss that triggers emotional trading. You might not know the exact number yet, but it exists. Once that threshold is crossed, it’s almost impossible to stay rational. That’s why proper money and risk management are critical: you need to prevent emotional trading before it happens.
The illusion of control
A major cause of “stupid trades” is the mistaken belief that you can control or manipulate the market. When the market inevitably moves contrary to your expectations, the clash between what you thought would happen and what actually happens triggers account-damaging emotions.
Trading is fundamentally a game of probabilities. Your goal is to tilt the odds in your favor using a proven edge, like a price action strategy, combined with sound risk management. Every trade should be thought of in terms of probabilities, not certainties. Even if your strategy has a 45% win rate over a year, that doesn’t mean every trade has a 45% chance of winning—traders often misinterpret it that way.
The reality is that your edge produces a random distribution of winners and losers. You can’t know the outcome of a single trade, only the overall performance of your strategy over time. Trying to control the market on any single trade is not only futile—it’s a huge drain on your money, time, and mental energy. Many traders repeatedly make poor trades because they haven’t yet realized that controlling themselves, rather than the market, is the only reliable way to improve their chances of long-term success.
You’re trying too hard
One of the biggest reasons traders repeatedly make poor trades is that they’re trying too hard—chasing too much money, too quickly. This often shows up as over-analyzing countless indicators, obsessing over every economic news release, over-trading, or over-leveraging. The drive to make huge profits fast is a surefire way to invite mistakes and “stupid trades.”
The solution is to focus on smaller, achievable goals first. Stop trying to “become a full-time trader overnight” or quit your day job immediately. While those big goals are worthwhile in the long run, they’re unrealistic in the early stages of your trading journey. Instead, break them down into manageable steps that can be accomplished on a weekly or monthly basis.
For example, a smaller goal could be sticking to your trading plan or practicing proper risk management for a month. Achieving these smaller milestones builds both your skills and confidence, bringing you closer to your larger, long-term objectives.
Traders who juggle too many ideas and signals are prone to stupid trades. Think about it: how can you make good decisions when your charts are cluttered with five different indicators, three streaming news feeds are running, and dozens of “experts” are constantly giving conflicting advice? The constant noise makes confusion inevitable.
One of the most effective ways to reduce stupid trades is to simplify your approach. Focus on a single, reliable method—like price action trading, which I teach in my course. While no method is perfect, concentrating on price action allows you to eliminate confusion and frustration, drastically reducing the chances of making trades driven by emotion or information overload.
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