What are some other reasons people fail as traders?
People underestimate the time it takes to succeed as a trader. Some
people come here and think they can sit with me for a week and
become great traders. How many people when they went to college
would've thought to walk up to the professor and say, "I know the
course is for a semester, but I think a week should be enough for me
to get it." Gaining proficiency is the same in trading as in any other
profession—it requires experience, and experience takes time.
A man who attended one of my seminars a number of years ago
asked me, "How long will it take me to become a professional trader
so 1 can quit my job and support my family?"
"Three to five years," I said.
"What! I'm going to do it in six months," he answered.
"Well, you're probably a lot smarter than I am," I said. "I didn't
make any money in my first five years."
It's seven years later, and he's still not profitable as a trader. You
can't expect to become a doctor or an attorney overnight, and trading
is no different. It is a vocation that takes time, study, and experience.
Wisdom is a product of knowledge and experience. If you have more
knowledge, you can get away with less experience and vice versa. If
you can get both, the learning curve is very steep.
Why else do people fail as traders?
Another common reason is undercapitalization. Sometimes I get
people at my seminars who want to start trading with $10,000. I tell
them that they should convert the $10,000 into hundred-dollar bills
and then flush them down the toilet one at a time because if they try
trading with $10,000, the result will be the same, but it will only
prolong the agony. Ten thousand dollars is not enough money to
trade.
All the reasons for failure you have mentioned so far relate to the
attitude with which people approach trading: a lack of commit
ment
or funds going in. What flaws besides attitude cause people
to fail as traders?
It's not a matter of intelligence, or even market knowledge. I've seen
people with good trading skills fail, and those without any previous
experience succeed. The main thing is that every trader has to be
honest about his or her weakness and deal with it. If you can't learn to
do that, you will not survive as a trader.
Several years ago, an option trader who had scheduled to come
visit me at my office asked whether I would be willing to review his
trades for the past year before he came. I agreed because I genuinely
want to teach people how to trade.
He said, "I had 84 percent winning trades last year."
"Good," I said, "did you make any money?"
"Well, no," he answered, "I lost money for the year."
"Then the 16 percent is what we need to focus on," I said.
"That's why I wanted to send you my trades."
He sent me his trades, and I found that out of about four hundred
trades he did that year, five trades accounted for almost all his losses.
At first I didn't notice any common denominator. Then I checked the
dates and discovered that four out of five of these trades had been
done on expiration Fridays. I called him up and said, "I found your
problem."
"Oh good," he said. "What did you find?"
"Four out of five of your big losing trades were done on an expira- .
tion Friday."
"Oh, I knew that," he answered.
"Well, there is a way to fix this problem," I told him.
"Good, good," he said. "I knew you would have the answer."
"Don't trade on expiration Fridays."
"Mark, what are you talking about? Those are the most exciting
trading days."
"You have to decide whether you want excitement or you want to
make money. Quit trading on expiration Fridays. Go out and do something
else on those days."
"Oh no, I can't do that," he said. "I can't give up the action on that
CurrencyMan:
What I find fascinating is not the information however how a complete lack of discipline or a closed mind or whatever means all of the above great information is probably not useful for most that read it.
Einstein said INSANITY is doing the same thing over and over again and expecting a different result.
Can you change your habits if you are not winning by trading forex ?
Only you know that.
Fiscal Cliff is somewhat like Insanity ... The same old until ...