Why is it that 90% or more of traders fail? I mean have we really asked this question. It is a baffling statistic. I just finished Tom Hougaard's excellent book “best loser wins” and he talks extensively about this. He was able to get data on 25,000 traders, conducting over 1 million trades. He has said in his book and many other books I’ve read, that good trading goes against our human nature. Much of the mistakes that we make as traders can be traced back to our caveman days. It is hardwired in our DNA to avoid pain, to run away when we are in stressful situations, to avoid being harmed. So much of what we have to do demand that we go opposite of our 200,000 year old brain. So, we can really blame our ancestors, or our brain wiring if you will. This is also help me to understand how I can know the right thing to do but don’t do it in my trading. I have come to handle that 100 times better than in the past but it’s definitely still a challenge. Why? Because I still have a 200,000-year-old brain. It is not easy to do the thing which feels uncomfortable, feels not right. Like for example I can be profitable on a trade I can even be up 40 or 50% and don’t hit the exit button. Or be negative 30% and not exit, and see it go to -80% or -100%. That is my hardwiring kicking in, Greed and Fear. To exit means I may miss out of more profit. To take loss is to feel pain and admit I was wrong. Both go against my hard wiring and do not feel right to do. So the real question is how do we overcome our hardwiring? Unfortunately it takes a lot of time and experience. Unfortunately it takes a whole lot of pain along the way. It sucks to go through hard times but I think that’s part of what has made me finally somewhat successful as a trader. And now we can use the computer to do that un-human activity for us. I set limit orders (bracket orders) to get me out and do the thing that is hard to do. Anyway I would love to hear your thoughts on this? If you are baffled by your struggles as a trader, give yourself a break. You are human and that seems to be the issue.
Reasons for Failure: - excessive leverage - lack of insight (markets/screen time) - catastrophic loss/trade (not using stops or inappropriate stops) - personal life in turmoil - not seeing both sides of the trade at any given time - lack of systematic edge - day trading is different from investing (daytraders rarely carry inventory session to session)
Because they listen to this song : And they persist to do the impossible And they refuse to give up. It doesn't mean if you try and try damn hard, you will succeed decades later. Sorry to say but at some point, you have to give up. Then go try other businesses/careers/jobs. The real reason why traders fail is because they are trying to do the impossible.
That's what makes trading worth it. If 90% of traders win on a $ basis, that means the $ losses of the 10% have to be shared across the 90%. Peanuts. Might as well work at Walmart then.
What I did that seemed to help is to change my goal from making money to trading well. You consider taking small losses not as losing money, which is painful, but as trading well and protecting capital which is part of the plan to achieve your goal. You become your own coach/mentor, watch yourself trade and keep your emotions in check. Ask yourself did I follow my plan rather than did I win or lose. Take fear out of the equation. Ask any failed trader why they stayed with a losing trade and they will probably start the answer with "I was afraid", of taking a loss, of the price going back up, of getting out at the bottom, of looking stupid, of being that guy, or any number of other rationalizations. If the goal is to follow the plan, then there is nothing to fear.
What would you choose?! 10k on your bank account, but only general knowledge about trading (techn. analysis, etc.) OR 500 on your account, therefore extensive knowledge about options trading, subscription to all important market data, knowledge on econ. calendar, news, know-how how to scan the stock market and what to look after... 500 can bring you more, if you know how to trade stocks & options & what parameters to look for. General knowledge is not sufficient. I watched some Ross Cameron stuff, and from some other guys, and I have huge respect if someone can scalp trade, invest 90% and make a 100%+ return on that in 1 trade. So you can do it fast, with stock trading, or slow with selling options. The only two ways I know of, additionally to futures trading at the right time and with the right information.
One has to decide whether s/he wants to feel “right” vs making money. One needs to be free of psychological conflicts (self-sabotage) and have emotional maturity to start acting in one’s best self-interest. Once the wannabe traders fully accept what it means to be a trader, then their struggles with the market will disappear.