We all know the odds. 90% of traders quit within 90 days of opening a trading account. But why?
We can apportion much of the blame to lack of education/knowledge about how to trade because many people say they started trading because of an advert they had seen.
I would imagine the typical story is someone opens a trading account, pops a couple of hundred dollars in and then trades until they lose it all, with very little by the way of risk management involved. Maybe they inject in some more capital but once this has happened enough, it’s likely the trader becomes despondent and gives up.
But what about those people who have had some form of trading education? Maybe they’ve read some books, gone on a course or a program. Why do these not all become highly profitable?
The reality of trading is that most people who get into it expect positive results for their efforts within a small time horizon. You imagine a new trader fresh out of a trading course. They’ve learned the fundamentals of how the markets operate and the technicals of how to approach it. They have been shown risk and money management techniques, so they are unlikely to blow an account.
How is it then, that after a year, maybe two of trying to master the market, they simply throw in the towel? For most normal endeavours, there’s a reward for the amount of effort you put in. If you go to work on a building site laying bricks all day, you will be paid for helping to build that wall. But in trading, you can be busy buying and selling all day and not only not get paid, but potentially lose money from your account too.
There simply is no short term correlation from the amount of time you spend in front of your screens and whether you make money. This is extremely difficult for any newer trader to grasp.
In trading, we have the potential to make more money in a week than the average annual salary in a country but we also have to deal with the psychological traits required to get there. Unfortunately, most traders spend more time worrying about strategy than they invest in themselves and their own mindset.
Having the patience to sit and wait for the right trade to come along rather than chasing every false move the market gives; having the strength to hold onto winning trades when our burning desire is to cash in and bank that open profit; being able to deal with a string of losers, or even worse a prolonged drawdown; dealing with the uncertainty of whether our strategy is still working or not. The list of psychological strengths you need to succeed is indeed very long.
Without the ability to deal with everything the market is going to throw at you, you are highly likely to become one of those traders who ‘gave trading a go for a while, but ultimately gave up’.
Like a professional sportsperson, you need an iron will and the tenacity to keep going when anyone else would throw in the towel. That’s why so many traders fail, because they never gave it long enough for their mindset to harden to the environment they were pitting themselves against.
The market is a very hard task master and will challenge your resolve, will you become a statistic or one of the few who realise what the holy grail real is?