Depressing fact, but all too true. The failure rate among traders is staggeringly high. Disgustingly high. So high, it makes me want to vomit and then go kick the dog (ok, not kick the dog – don’t get your panties in a bunch PETA…especially since I don’t HAVE a dog!)
But I hope you can sense my disgust with this statistic. Think about that for just a minute. Of every 100 traders who jump into the industry, all bright-eyed and bushy-tailed, 95 of them will lose EVERY LAST DIME of their investment portfolio.
To discover why 95% of all new traders fail within the first year, and how you can be one of the 5% who succeed, read on.
There are many reasons why the failure rate among new traders is so astronomically high. In this article I’d like to focus on just one that in my opinion is either completely or primarily responsible for the bulk of these failures.
In their ignorant exhuberance, most wannabe traders run out and find the latest trading fad, or they hear about the best trading system available from Uncle Billy-Bob, or they read about a brand new trading mechanism on line.
These new “traders” get overly excited, they do a little reading on the subject, make a few practice trades, and decide they are ready to trade live in their new-found money making system.
And that’s when the “fun” begins. These new traders have NO IDEA what they are in for. The lucky ones experience some immediate success before the losses hit. The unlucky ones are in the red from trade #1, and they never look back, never reach break even.
So what happened to these would-be traders? They went out and found trading systems that were over their heads, and they didn’t spend the time necessary to effectively learn the technical or fundamental trading system they were using.
They didn’t put in the hours and hours over the course of months (or even years, depending on the detail of the analysis involved) learning how to read the charts and indicators, build the models and the formulas, and discern the trends.
And then these new traders start to experience what I like to call “market hallucinations” - they start to see trends or indicators in their charts that aren’t really there. They jump into trades at exactly the wrong time, in exactly the wrong direction.
Why does this happen? Because 95% of all Wannabe Traders don’t take the time necessary to learn their chosen trading system. And why don’t they do it? Because most trading systems involve complex technical analysis, intricate statistical models and formulas, and involved hors and hours (and hours and hours and hours) of practice and training before someone new to the system is ever ready to start trading. Whether its a lack of time to learn the system, laziness, or over-excitement to get started, the overwhelming majority of new traders fail because they don’t take the time necessary to develop a firm grasp on their chosen trading system.
And then the losses start rolling in. First slowly, and then faster, and larger losses. Compounding their losses, these new traders fail to prepared themselves mentally. They fail to understand that losses are an inescapable reality of trading. EVERY TRADER has losing trades. It is how a trader reacts to a losing trade that determines his/her level of success.
Most new traders react one of two ways when they experience their first losing trade – either is equally devastating to their trading account balances. These are the two “loss traps” of trading.
One common reaction is the trader gets emotional about the loss, and starts making irrational trades trying to recoup his/her losses. They get bolder and bolder, and make more and more trades, trying to recover what they have lost. And with each successive losing trade, the losses that they try to recover are deeper and deeper. They start to behave like a compulsive gambler who is trying to recover his losses at the Craps table. And before they know it, they’ve not only gambled away their entire trading account, but the next month’s mortgage payment as well.
The flip side of that coin is the trader that is emotionally devasted by each losing trader. After the first losing trade, they grow tentative, scared to enter into a trade, even if all the right indicators or trends are there. They become so afraid of losing a trade, that they fail to enter into a winning trade. Or when they are in a winning trade, they “chicken out” of the trade after just a few ticks of profit.
Here is an important point that must be made – ALL new traders at least initially fall into one of these two categories. 95% of traders can never work their way out of their own personal “loss trap”. 5% eventually do.
I personally fall into the second category of traders. When I first started trading, a losing trade would RUIN me for days. I grew tentative to enter trades, and nervous when I was in them. I chickened out of many winning trades well before my profit targets were reached (which eventually they were) because I was so deathly afraid of losing.
But I was one of the 5% who are able to over come this trap. I was fortunate in that I was (and still am) using a trading system that is extremely easy to learn, requires zero technical analysis, only takes a few minutes a day to use, and is highly effective.
In fact, this is the single best way to overcome all of the above-mentioned “trading obstacles” – find a system to trade that is easy to learn, takes little time to implement, and is highly effective. This way you don’t have to worry about spending months or years learning complicated technical analysis. You don’t have to spend all day long in front of the computer. And you begin to experience success much earlier in your trading career, helping you to overcome your own personal “loss trap”.
To discover how you can learn to trade my system that I use in literally minutes, sometimes SECONDS a day, consistently generate 20%, 30%, even 40%+ profits a DAY, and is highly effective (how effective? over the past four weeks, I have personally generated an 81.25% win ratio!), all that you need to do is enter your name and email address into the following form, and you will receive a FREE copy of The Guerrilla Trader – Day Trading Success Video Boot Camp.
