We don’t sugarcoat it. Most people fail at this game. The 90%-95% failure stat you see thrown around all the time isn’t far from the truth. There are struggling traders everywhere, despite how it appears to be on social media. If you’re reading this you probably fall in this category also.
Despite what society tells you, you are not a failure if you don’t succeed at something right away! If this was easy and you could figure out this in a few months, everyone would be doing it.
The “95% failure stat” is mainly full of new traders who try this for a month, and then give up as soon as it gets challenging. I think the failure rate would be much lower if we sampled people who have been trading for 3 years in a study. Statistics like that never talk about WHY they are failing. If you don’t do what the 95% do, you give yourself a chance to become the 5% that succeed.
Figuring out what you’re weaknesses are is essential for expediting your journey to profitability. After working with aspiring traders for over a decade, there are 5 broad categories I can place struggling traders into. In today’s blog, I will talk about these categories, and what you can do how to solve these issues:
FOMO Traders
If your trading executions look this, you’re a FOMO trader. This is the most common category I see across the board. Some people just cannot deal with missing out on an opportunity. FOMO is a huge barrier to profitability because every day there are thousands of stocks moving.
You are guaranteed to miss opportunities! In order to get over FOMO you need to have a defined niche that you know has an edge in the markets. When you have no niche or strategy, every stock that moves seems like an opportunity.
When you have a trading niche, like trading earnings breakouts on large-cap stocks for example, you know what you are sitting around waiting for. A small-cap going 100% won’t bother you because you know it’s not your niche, and you don’t have an edge trading those stocks. Accept that you will miss opportunities, and focus on the future, not the past.
Stubborn Traders
Stubbornness is a deadly trait when it comes to trading. Being able to contain your losses is essential in order to find consistency in your trading results. And stubbornness is the biggest obstacle to keeping losses small.
Your ego is your biggest enemy in trading. Most people are raised by their parents and society to perceive being wrong as a negative event, and something you should fear. In trading, being wrong is inevitable. No trading strategy wins 100% of the time. Being wrong in trading, and in life, doesn’t mean you’re a bad person.
Even with a great strategy that has a 70% win rate, you still have to prepare for the 30% of the time the trade will be a loser. If 1 loser wipes out 10 winners, even with a 70% win rate you will not be profitable.
Get this in your head: You will never become a consistently profitable trader if you cannot keep losing trades small. Fuck your ego. Use hard stop losses if you have trouble cutting losses, and stick to them!
Greedy Traders
There is a difference between being greedy and letting a winner ride. Many people have this dream of getting rich overnight from an investment. They go up nicely and a position, and don’t take any profits because they want to hit a home run. Then it comes all the way back and all their profit evaporates.
Most profitable traders don’t make a living from trading by hitting home runs every week. They rack up consistent base hits instead. Usually, this concept of homerun trades stems from a desire to “get rich quick”.
This conception and desire must be squashed from your mindset. Take partial profits to lock in when you are up on a position, and let a smaller portion of your position ride for a bigger picture move. Consistent, small gains add up quick.
Underprepared Traders
Many trading services create the impression you can make 6-7 figures working 30 minutes a day. This is possible, but what they don’t tell you is about all the work and study they put in outside of the market hours to capitalize during the market open.
Most new traders are sold (and believe) the pipe dream they can just follow someone’s alerts and make a living from the stock market. This is not even remotely realistic. Following someone’s trades will NEVER make you money in the long run.
Trading is no different than any other profession. It requires education, discipline, and a ton of preparation in order to find success. Lawyers study for at least 8 years before they get in the courtroom and start representing clients. Mastering trading usually won’t take that long, but it requires a similar process and dedication.
The Anxious Traders
In. Out. In. Out. In. Out. Scared money doesn’t make money in the stock market. Many traders fail because of they overly fearful. Scared to lose money. Afraid of a profit turning into a loss. Scared of failure and losing. Afraid of missing a big move.
When you trade in a state of fear, you won’t be able to make the correct trading decisions. In order to become a successful trader, you have to be robotic and unemotional in your decision making.
One of the most common reasons traders are fearful is because they are trading with money they are emotionally attached to. Decrease your position size to a point where losing the money you are risking on a trade is no more than 1% of your whole trading account. This will allow you to objectively view market information, and not operate in a state of fear!
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