I got an amazing letter from one of my students on Paul on why new traders often fail. There are so many factors that go into your success as a trader. Often new traders believe they can take a class or read a book and that gives them the right to make big money. But it doenst work like that. Trading is a profession its a job no different then being a doctor or lawyer. It requires the same principles to become excellent. You have to learn, then study, then practice your craft thousands of times before you ever even attempt to do it live.
Ive spent a lot of time discussing different traits that I believe a trader or student must have to be a success that I detailed in this blog
10 Traits of Successful Students Turned Traders
Here is a look at what Paul believes were some of the factors that held him back and my thoughts on it.
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Paul hit on a lot of points here that I think are important. One of them is having reasonable expectations. Most students come in and see all these posts from all these traders having these huge days. They think they can just come in and take a class and live like that. But there is so much that goes into the story before that. Most of the successful traders I know are the hardest workers I have ever met. They train their bodies and minds everyday for success. Trading is a profession and it requires the same amount of study and discipline as anything else. Its no different then being a doctor or lawyer. This is a job. Risk management is often thought of as the most important thing for a trader and it is important but many of the students i have met our great at taking small losses. The thing is that they also are great at taking small gains. To be successful you need a toolbox of goto setups that are your own that you know you can win on and have the ability to really ride the win when your finally in the right stock pick. See when you lose and are slumping its very easy to just sell every winner for quick gain. You see green you want to take it and you rationalize that money is money “doesn’t hurt to take profits” . Thing is that your longterm success is determined not by whether you made a couple bucks on the stock but whether you traded that stock well. Whether you extracted as much as you could out of it within the parameters of your setup. This is huge… a win is not a win…its about whether you did the right thing. Longterm that is how you make money.
Paul mentioned in his 4th point. FEAR. That is huge. When you trade your not just trading setups your trading your hopes and dreams and your expectations. A string of losses brings in the fear. Trading is 95% mental. You have to be on the hunt at all times and let the numbers play out. When I slump I take a step back and only trade my goto setup that I know I have X win % on and that i have a great reward to risk ratio on it. You need a SLUMP BUSTER!
The next points Paul makes are pretty explanatory and happens to almost all traders. They lose so they get a bit lazy and then they start to think of everything as luck. Ive had quite a few students start out hot over the years and then their first slump they lose all hope and turn their whole system upside down. All of the sudden you lose the desire and you start to rationalize things. You got to be strong. GRIT is huge. One of the things that makes maribeth such a good student of mine and a great trader is that she has incredible grit. Even after she went from 10k account to over 70k and then lost most of it she didn’t lose hope or disappear in embarrassment. Instead she doubled down and bothered me more and worked even harder. Its hard to do that..but thats what you MUST do.
Here is a quick article by another indian blogger @stockbee who runs a great service on GRIT he says
“After trading 14 years profitably and talking to many other traders the consistent theme is ability to persist in initial years after many setbacks. Some blow up multiple times before finding their unique edge. The edge they find may not be big but the process of trial and error and persistence leads to their unique personality that can not be easily replicated.”
Thats the ballgame! I always tell my students in our BOOTCAMP classes and the 200 traders I have in my hedge fund that what will really determine your future at this is how you bounce back from that initial big slump. All traders at some point will blow up an account or come close. How you bounce back from that initial shock to the system will really help determine your future. That grit is important! Every CliqueFund trader that makes money has this. Every successful BOOTCAMP student has had this.
1 thought on “Why Do Some Trading Students Fail?”
This is a great post! Thanks, Paul and Kunal for sharing…. I struggle with this as well. Part of my responsibility is overseeing money for my parents and I hate losing their money… a ton of pressure. I’m just now beginning to rebuild my confidence from a few losses, that were part of a risk reward setup and acceptable… Continuing to move forward and build!
Thanks! Kunal, this would be a great addtion to upcoming bootcamps… just my 2 cents.