“Many traders, surprisingly, aren’t competitive at all: they’re drawn to trading because of a perceived easy lifestyle. These are among the least resilient traders. As soon as it becomes clear that trading out of a hole means real work, they lose motivation and interest.” – Steve Ward
Why do some say they are no longer interested in trading? Some even believe that retail trading doesn’t work because they’re yet to see any consistently profitable retail trader! Some also think that only institutional traders are well equipped to make money through trading – thinking that retail traders are simply incompetent. Some who abandon trading think there are many better ways of making money. Are they right? Before these questions are answered, here are a couple of excerpts from articles written by established traders.
“The vast majority of market players will start with a trading book or seminar written or delivered by someone who writes books and delivers seminars, NOT a real market speculator. These books are filled with conventional use of indicators and chart patterns that simply don’t produce consistent profits. If they did, the author would certainly not be selling the book to you. This leads to a novice trader thinking they can take a trading strategy short cut, and add a few indicators and oscillators to a price chart and let the computer find the parameters for each of those indicators that would have produced the best results in the past (back-testing). Typically, when the novice strategy trader begins trading with real money based on those quality hypothetical results and begins losing money, they take the next wrong step, they begin adjusting indicator settings and worse yet, they add more indicators. This is a path that leads to trading disaster, yet the novice strategy trader does not even know it. They say, “How can a strategy with such great back-tested numbers not work?” It doesn’t work because the strategy is based on number crunching and curve-fitted, back-testing results.” – Sam Seiden
“Many new traders begin by learning a variety of technical analysis tools. This usually comes from a seminar, a book or a website. Excited, the trader thinks he understands head and shoulder patterns and has just unlocked the secret to infinite wealth. He starts trading the patterns but finds them a lot harder to interpret in real time than in hindsight. Where exactly should he enter and exit? Having lost money on these patterns he hears another trader making money using the MACD indicator.
With renewed excitement he studies MACD and starts trading but still loses. The frustration is now building and confidence is low. A trader he met recently said he was making money trading gold. Perhaps that is the secret – so he switches – to trading gold yet still loses. A lady he met was using expensive charting software while he is still using free stuff. He purchases the fancy software, …more money down for doing so and still consistently losing in his trading. What could possibly be wrong? Perhaps the timeframe… he has heard that short-term traders make less than long-term traders, so he switches from one-hour charts to daily charts. Now the losses are larger and more drawn out over days and weeks. He understands the technicals but they’re simply not working out. This is a common problem and many traders could recognize themselves or others who have experienced a very similar situation.” – Nick McDonald
I have a friend who passed out of a reputable tertiary institution. Before he got a job at a regulated commercial bank, he worked for a wonder bank as an accountant. A wonder bank is an investment establishment that promises exorbitant returns on the money deposited with them (something just like a high yield investment plan). A wonder bank may promise you anything from 50% to 200% or more on a monthly basis. Of course the wonder bank intended to make those high profits from the Forex markets. Many greedy members of the public who liked to hear what they wanted to hear deposited their monies with the wonder bank. Eventually the investment failed and the monies went down the drain. This friend of mine who was working as their accountant was a witness of this fiasco. He read more about Forex and saw some honest experts saying it isn’t that easy. After getting a job at a legitimate bank, he started telling many people that Forex doesn’t work for individuals. Who wouldn’t believe a banker that was even formerly part of some supposed Forex gurus. You’ll see many people propagating my friend’s wrong beliefs about Forex. There are traders in his bank; and he thinks trading only works for institutional traders.
I have another acquaintance who used to boast of making regular profits from the markets; as if he were the one controlling the markets. When I asked him about the strategy he’d used, he mentioned a system that wasn’t different than what an average trader can get. In addition, the kind of training he got was what I wouldn’t even recommend to my enemies. Anyone who heard him talking with self assurances may have been tempted to give him their retirement money to trade with. After some weeks, I met him somewhere and he started telling me how he had losses on losses. He concluded that he’d never trade again and would never advise anyone to do Forex. He told me there were other easy ways to make money online (It became clear that what he was looking for was easy money, and when he couldn’t get it from Forex, he decided to look for other ways of making easy money online). People tend to blame the markets instead of accepting responsibility for their failure.
I also know of a respected banker who’s won many awards but he doesn’t believe in individual trading and doesn’t even want to hear about it.
It’s amazing to see those who aren’t traders (who haven’t even seen a market chart) making strong negative statements about Forex. Their opinions were gotten from floored market novices. Yes, some think trading doesn’t work because a defeated novice (posing as a professional) has told them so.
One group of marketers (pretending as pros) used to come from another state to my state every month to sell a trading product. They had something new to sell each month, mentioning each product as a Holy Grail. If a previous product failed, they mentioned the new one as the final breakthrough. They were so popular that they got tens of thousands of followers. Alas, they were teaching beginners extremely high risk trading and poor money management – claptrap. Nothing like risk management or trading psychology was mentioned or taught.
I have yet to see anyone coming out of their numerous seminars who’s still surviving on the markets. Seminars are only good for information dissemination: they don’t make you a professional in any field. No wonder only 90% of those attending seminars (not only on trading, but on anything whatever) never succeed in real life. Later these seminar organizers began to advertise seminars on solar power; later, seminars on fueless generators; later, seminars on how to print recharge cards; and later, seminars on how to export agricultural produce. I called them and asked about Forex and they told me they were no longer teaching Forex (their boss wasn’t even answering any calls again). So these supposed trading professionals were actually marketers who weren’t committed to trading! Yet their former students kept on spreading false ideas about Forex. Yes people believe them because they look at them as experts.
There are some others who ask me for help – either free or paid. Some solicited for my professional support, and whilst the negotiation was going on, they were secretly venturing into trading with some ‘hidden professional(s)’ and/or trading with some apparently magical trading systems. After they’d lost heavily, they’d announce to me that they were no longer interested in Forex because they’d lost their money in trading. They often said, ‘If we lost through someone who called himself a professional, then what’s special about you?’ There are some who think they know a lot about trading, but they’re actually novices. I suggest that you let their account histories speak for them.
Now let me emphasize some points: Firstly, institutional traders are never more skilled than professional retail traders. They merely have huge funds to trade with, and that doesn’t make them better than somebody who’s trading consistently profitably on a live micro account who started with $50. The one who started with that $50 may even be far more competent than the one managing millions of dollars. One quail isn’t taller than the other; except the one that stands on a ridge. When people want to choose a trading mentor, they feel that the mentor must be rich, without thinking whether the person actually made his money from trading. They tend to look down on skilled traders who aren’t yet extremely rich.
Secondly, the fact that you or/and your brother or/and the group you know have failed in retail trading doesn’t mean that it doesn’t work. It works for some people. Your failure doesn’t mean that every other person is failing. If you don’t know those who succeed in trading, I’ll tell you confidently that they exist. You failed and you decided to quit trading forever. They failed and decided to move on; learning from their mistakes. Misinformed opinion has no effect on the biggest market on the earth. Again, expertise in one arena doesn’t mean that that dastardly opinions about Forex are valid.
The fact that people were misguided about the markets doesn’t mean there aren’t market professionals who speak the truth about the markets. If some had been led to their downfall, it doesn’t mean that there aren’t those who are being led to victory.
Thirdly, if you or any other person threatens to quit trading, it has no effect on anybody. Your presence or absence in the trading world makes no difference. My presence in the trading world is just like a drop in the ocean. The Forex markets are like China; she doesn’t know that someone is leaving. For anyone who decides to leave the States, thousands are dying to enter. For each person who threatens to quit trading, thousands of people are willing to enter. So your absence on the markets doesn’t affect anybody and the markets. As far as the trading world is concerned, no-one is indispensable.
If you leave trading for another kind of easy venture which is supposedly better than Forex, it’s likely that you’ll soon be disillusioned as you got disillusioned with trading. Success in any endeavor requires perseverance, resilience and sacrifice.
Lastly, I’d like to tell you unequivocally that retail Forex trading works. One of the most important factors in achieving success in any arena is being in that arena long enough to develop the skills, knowledge, understanding and experience to enable you to achieve your best levels of performance. Along the journey to success as a trader there’ll be many setbacks, periods of drawdown, times when you question you own motivations to start trading, and times when you’ll face yourself, and your barrier.
For those of you who’ve decided to continue your journey to financial freedom, strong motivation provides strong resilience. Take an optimistic perspective in terms of seeing things as being temporary, and not taking them too personally. Focus on what you want to happen and how to create it, and not on what’s happening and how to stay there! Consider the trading risk you take in relation not just to the potential profit, but to the potential downside. Take risk management seriously.
In conclusion here are a couple of quotes that may help you:
“Taking a common form of technical analysis and applying a new name to it helps authors to sell many new books each year. Knowing the names of these patterns unfortunately does not help traders make money. Profitability requires more than a name; it requires an understanding of the technicals and then the skill and discipline to follow a proven and tested trading strategy through both good times and bad.” – Nick McDonald
“When they’re losing, resilient traders delve deeper into themselves and deeper into the markets. They gain motivation to figure things out. Lesser traders become mired in discouragement and frustration, spinning their wheels by venting (or acting out) their emotions or by avoiding trading altogether.” – Steve ward
Mustapha Azeez can be contacted at FX Instructor