You’ve heard time and time again that long-term trading success requires a strong commitment. We’ve all seen the negative results of those who aren’t dedicated to their aims, both in and out of the trading world. When a person isn’t dedicated, he or she waxes and wanes, procrastinates, breaks up easily, and never appears to attain their objectives. Whether it’s graduating from college, establishing a business, or obtaining a substantial promotion, achieving significant life objectives necessitates a strong commitment. Trading, on the other hand, appears to be a little different; many people appear to have difficulty committing to a long-term strategy. There are numerous compelling reasons for this. It is beneficial to become aware of them and learn to deal with them.
Trading is unlike many other occupations in that the work put in does not always result in an obvious and immediate profit. In most occupations, the number of hours you spend studying and using a skill has a direct correlation to the amount of money you make. For example, if a mason is constructing a wall, he or she understands that laying brick after brick, hour after hour, will result in the structure’s completion. The effort and the ultimate result have a straight one-to-one connection.
Traders, on the other hand, might put in hours of work yet still fail to achieve success. Trading requires a certain level of expertise before rewards, or profits, are constant. (This may be true in other professions, or not if a student has the ability to learn the skills is instantly evident to professors and gatekeepers, and students are discouraged from ever attempting to master the field.) One may rarely make a penny trading until they reach a high degree of trading skill. A strong dedication to trading is difficult to foster due to the likelihood that one’s time and work would not pay off quickly, if at all. It’s normal to doubt one’s ability towards becoming a successful trader. If you know deep down that your doubts are justified, a Pollyanna “can do” attitude will not help you overcome them.
There are a few options. Accept the fact that developing the abilities you’ll want to achieve a profitable trader may take some time. Don’t believe that you have to be lucrative right now. Second, practice makes perfect, as the old adage goes. Allow yourself time to develop the talents you require. It’s critical to practice, enjoy the learning process, and patiently wait to develop the essential abilities, just as it is with any activity that demands skill development, such as performing music or sports. Third, keep your objectives in perspective. Before opting to trade full time to create your whole income, you may need to establish modest goals, like as learning how to “paper” trade or effectively trade tiny positions.
It’s difficult to become a consistently lucrative trader, and this reality makes it difficult to make a definite commitment. Many skilled traders caution novice traders that attempting to achieve quick success is difficult, impractical, and disheartening. It’s wise to take things slowly at first. Acquire information, improve your talents, and then progressively expand the size of your job. Even experienced traders admit that trading is so tough in the long run that they only do it “one day at a time,” or one deal at a time. It’s simpler to create commitment if you start with minor goals and work your way up to bigger ones. Following this advice will help you maintain your long-term trading commitment.
Why Do So Many Traders Fail?
According to this statistic, 80% of people lose money over time, 10% break even, and 10% constantly gain money. This statistic is unique in that it is not depending on geographic location, age, gender, or intellect. Everyone wants to be one of the top 10% of stock market traders who regularly earn money, but few are prepared to put in the time and effort required to do so. When I make a presentation, I always ask the audience if they choose me to offer them what the 10% of traders understand or the other 90%, and they always pick the 10%. To me, the key to comprehending the 10% is simple: read through all of the books and courses offered and ignore the vast majority of them.
To be a successful stock market trader, you must do what the bulk of traders do not. And besides, you don’t understand what you don’t know, therefore this may appear to be a basic viewpoint. So, how can an unskilled individual figure out what they’re really doing from the avalanche of information available? In this essay, I’ll explain why most stock market traders lose money on a constant basis and, more significantly, what you can do to prevent becoming one of the 90%. I’ll also give you an insight of what the successful ten percent of traders do.
The Day Trading Revolving Door: Assessing the Day Trading Success Rate
While anyone may be successful, the majority of people who enter the trading market lack the discipline and patience to develop a technique (or collection of tactics) until they consistently earn a profit. While most novice traders are warned they won’t be successful overnight, they don’t believe it. They believe that they are wiser than someone else they will generate money rapidly. Nope. You could make the “usual” 10% every year or such… However, making a livelihood on a $30,000 account earning 10% a year is difficult. We, the day traders, require more.
You may have heard that 90% or 95% of traders lose money, or any other ostensibly high figure. This is correct based on my own experience. When I worked for a day trading business, roughly 10 people came in for trader training every couple of months, or about 60 people each year. Over the course of five years, around 300 persons visited the trading business and participated in (or at least began) the training program. Some of the dealers I spoke with believe the true number is closer to 400 persons.
Only 14 people (men and women, including myself) went on to become regular traders, generating steady profits for at least a few years. This equates to a success rate of 3.5 percent to 4.5 percent. Another ten earned a profit, which isn’t enough to continue them trading. If success is defined as being somewhat profitable (for at least a few months), the success rate is around 6% to 8%. But then again who wants to trade only to make a profit?
Also, keep in mind that (stock market) day trading businesses in Canada do not always ask traders to make a deposit. Very few of these traders put their personal money on the line in order to trade. They could trade firm capital, and based on their success, additional firm money would be allotted to each trader. This is a lot better model than what anyone day traders have at home, trading their own money, which often varies from $2,000 to $30,000 (although $10,000 may create a respectable monthly income if trading futures or forex…but you’ll need more if day trading equities). To put it another way, conditions were extremely favorable–oh, and since we had more cash, we were able to trade larger positions, resulting in far lower fees than a typical stock day trader might encounter.
Only 4.5 percent of day traders succeed? Consider the following:
If looking at a 3.5 percent to 4.5 percent success rate, there are a few elements to consider. The business didn’t want you to perform day trading part-time, so you had to show up and trade during market hours. Many part-time day traders may have attended the training and then departed (contributing to the high 95.5 percent failure rate)–some might just have moved on to be excellent elsewhere. We have no way of knowing. We must suppose that some of individuals who joined the company and left went on to be one of successful day traders, so the true success rate is slightly greater.
Also, because I reside in a wealthy city, dealing for free until successful probably didn’t sit well with certain individuals. If some of the employees who were tempted away by other employment had stayed, they may have been successful. To day trade and be lucrative, you must have a “hunger.” You must have a strong desire to succeed in order to persevere through the steep first learning curve. Many of the folks who walked through the firm’s doors lacked that desire.
The firm didn’t offer much in the way of strategic advice. They delegated trading decisions to the trader. The majority of the training focused on order types, market fundamentals, and software. As a result, the training might be akin to what most individuals would learn in a high-level stock/forex market introductory course. Regardless matter the motivation, only a small percentage of those who wish to trade succeed. The key isn’t whether they accepted other employment, didn’t believe they received appropriate training, or simply didn’t make enough money. They arrived to trade but ended up with nothing in their palms while those seated next to them continued to profit. That, in my opinion, is the true statistic. Whether you’re enticed away, your spouse persuades you not to, success doesn’t come as soon as you’d want, or you’ve had a run of bad luck… It makes no difference what the justification is; the cold hard fact is that only roughly 4.5 percent of traders who begin day trading will be able to generate a profit.
With a mentor, your day trading success rate will be higher.
The success rate will rise with a mentor, but it will still be determined by the individual’s will to succeed and willingness to put in the necessary effort. With the help of a skilled mentor, I believe the success rate may rise to 8% to 10%… However, I lack sufficient evidence to make a firm statement. It may appear that having a mentor will only increase your odds of success by 8% to 10%, but consider this: having a mentor has quadrupled your chances of success over trying it alone.
However, I’m still skeptical about the (up to) 10% success rate with a mentor. Whereas potential day traders at the company where I worked didn’t get a lot of strategy advice, they did have total access to sit and trade alongside experienced traders. Being a good mentor, on the other hand, entails more than someone who is a great trader. Non-traders have taught me some of my most valuable trading lessons; they were just excellent teachers who knew what I needed. You may argue that you don’t need strategic advice either. I’ve established my own methods, and I’ve found that feedback from others has frequently hampered my ability to build objective own plans. A little advice is nice, but because you’ll have to trade on your own eventually (no one can do it for you), starting with a do-it-yourself strategy is a smart idea.
With a skilled mentor, though, the day trading success rate rises to a plausible 9 percent (halfway between the 8 percent and 10 percent discussed above). Some mentors are now superior than others. Some may provide no advantage at all, and you will have the same 4.5 percent success rate as everyone else. Several mentors may be excellent, increasing your chances of success by 25%. Furthermore, if a mentor is very selective in who they teach, only taking on traders who have specified personality traits and aptitudes, the success rate increases even more.