Why do so many find trading difficult?

[New Member]

I started trading around five months ago and so far have made a substantial profit. It's nothing major, though still in the thousands of pounds. Why do so many traders fail?

 

[dbphoenix]

Perhaps you've been lucky and they haven't.

Or perhaps you have a thoroughly-tested and consistently-profitable trading plan and they don't. Or they have one and don't follow it.

Could be either.

Db

 

[Vinayak1000]

In my opinion, consistent profitable trading requires several years experience. Often you need to be doing this full-time to really reap the rewards. There are times when you can work another job, sometimes totally unrelated, and still make good money trading. But there has to be a lot of knowledge procured for trading to be done successfully.
Most times we are in an environment where we are destined to fail. Maybe we don't have the passion for trading. I feel not everyone can become a trader and there has to be some inherent interest in the financial markets to be able to navigate them comfortably and make good money in the process.
You have to decide in your heart of hearts that this is what you want to do and then look to surround yourself with like-minded people who share your passion for this business. It often takes years to get yourself into the right sort of environment. This is just like any business. You will need to network and learn good tactics to trade and practice them regularly.
Some people give up too soon or invest too much of their capital in the hopes of gaining big. One important thing to keep in mind is to never risk a lot of your capital and not to start borrowing funds to trade. This can spell disaster. Take your time and have patience.
One day you may see that trading was something you enjoy or it is something that doesn't really appeal to your tastes.

 

[lawrence-lugar]

I started trading around five months ago and so far have made a substantial profit. It's nothing major, though still in the thousands of pounds. Why do so many traders fail?

This can kind of be a somewhat complex answer that many variables affect it. :cheesy:

But to quickly sum it down, generally speaking...I'd say it may be a combination of these: no plan, no experience, just simply gambling, etc etc etc

As for you making a healthy profit in only your first five months of trading...I wouldn't gloat that much. Come back in a minimum of two or three years first.

 

[dbphoenix]

In my opinion, consistent profitable trading requires several years experience. Often you need to be doing this full-time to really reap the rewards.

If one begins by studying the market rather than frittering away his time and money on dead-ends, he can become consistently profitable in far less than years.

As for reaping the rewards, one could argue that full-time is preferable to part-time, but unless one is consistently profitable, the amount of time spent is irrelevant.

Db

 

[tomorton]

I started trading around five months ago and so far have made a substantial profit. It's nothing major, though still in the thousands of pounds. Why do so many traders fail?

They're in a hurry. They think its easy, so they're not mentally prepared for the work it takes. When they hit some issues, they decide to pull out or more likely sabotage their own trading so the market wipes them out. I would argue they were never traders so shouldn't even be counted in the stats.

 

[New Member]

It's time consuming. I spend almost every spare moment researching what I might trade the next day (luckily, this process is getting faster with experience). I know people say you should keep your day job as that ensures a liveable income, but I honestly don't think it is possible. I am lucky in that I work at a family business and on very flexible hours, ensuring I can concentrate on the trading during market hours. Some of my best trades have come as a result of watching the price to enter a trade with high probability. You don't always see these if you don't watch the price as they unfold. But generally, I tend to go with swing trading style as I find those to be more profitable, most of which is done with limit orders. I update them if required on a daily basis. Initially, the trading was very energy sapping. I was new to trading with real money on the line and the prospect of losing several trades in a row could be quite devastating psychologically. This made me more nervous than I should have been. Trading can be quite lonely, not as glamorous as people make it out to be. However, when you start profiting that really helps. My advice would be to plan your trades well, by entering only trades you feel have a high probability of winning, be disciplined with stop loss and trade size and the profits should take care of itself. When you start trading well there is always the temptation to try and increase risk because you think you can increase the account size really fast. I am not going to get all happy though, because I know I have to give it another year or so to know for sure that I can maintain this level of profitability, and that it wasn't a lucky streak.

 

[jkane]

long run you get buried

Of course you can win for a few months

 

[NVP]

I started trading around five months ago and so far have made a substantial profit. It's nothing major, though still in the thousands of pounds. Why do so many traders fail?

tell me what you are doing and I will tell you if its plain luck going with market trends or you are a genius and we are not worthy .......

 

[NVP]

It's time consuming. I spend almost every spare moment researching what I might trade the next day (luckily, this process is getting faster with experience). I know people say you should keep your day job as that ensures a liveable income, but I honestly don't think it is possible. I am lucky in that I work at a family business and on very flexible hours, ensuring I can concentrate on the trading during market hours. Some of my best trades have come as a result of watching the price to enter a trade with high probability. You don't always see these if you don't watch the price as they unfold. But generally, I tend to go with swing trading style as I find those to be more profitable, most of which is done with limit orders. I update them if required on a daily basis. Initially, the trading was very energy sapping. I was new to trading with real money on the line and the prospect of losing several trades in a row could be quite devastating psychologically. This made me more nervous than I should have been. Trading can be quite lonely, not as glamorous as people make it out to be. However, when you start profiting that really helps. My advice would be to plan your trades well, by entering only trades you feel have a high probability of winning, be disciplined with stop loss and trade size and the profits should take care of itself. When you start trading well there is always the temptation to try and increase risk because you think you can increase the account size really fast. I am not going to get all happy though, because I know I have to give it another year or so to know for sure that I can maintain this level of profitability, and that it wasn't a lucky streak.

define high probability and your strategy ............we can then tell you if you are either a natural or very lucky so far :smart:.........no offence but 5 months would be an amazing learning curve to be consistently profitable day in day out ..........what is your win/loss ratio ?

 

[dbphoenix]

It's time consuming. I spend almost every spare moment researching what I might trade the next day (luckily, this process is getting faster with experience). I know people say you should keep your day job as that ensures a liveable income, but I honestly don't think it is possible. I am lucky in that I work at a family business and on very flexible hours, ensuring I can concentrate on the trading during market hours. Some of my best trades have come as a result of watching the price to enter a trade with high probability. You don't always see these if you don't watch the price as they unfold. But generally, I tend to go with swing trading style as I find those to be more profitable, most of which is done with limit orders. I update them if required on a daily basis. Initially, the trading was very energy sapping. I was new to trading with real money on the line and the prospect of losing several trades in a row could be quite devastating psychologically. This made me more nervous than I should have been. Trading can be quite lonely, not as glamorous as people make it out to be. However, when you start profiting that really helps. My advice would be to plan your trades well, by entering only trades you feel have a high probability of winning, be disciplined with stop loss and trade size and the profits should take care of itself. When you start trading well there is always the temptation to try and increase risk because you think you can increase the account size really fast. I am not going to get all happy though, because I know I have to give it another year or so to know for sure that I can maintain this level of profitability, and that it wasn't a lucky streak.

You're telling only part of the story. You simtraded for several months over a year ago, so it isn't as though you hit the ground running five months ago with real money. IOW, you appear not only to have done your homework but to have done it properly. Though it's none of my business, I'm interested in what you did between the time you stopped simtrading and began trading with real money.

There are ways of avoiding the research if you don't enjoy it. Perhaps by now you're ready to explore alternatives.

Db

 

[New Member]

They're in a hurry. They think its easy, so they're not mentally prepared for the work it takes. When they hit some issues, they decide to pull out or more likely sabotage their own trading so the market wipes them out. I would argue they were never traders so shouldn't even be counted in the stats.

Exactly. Even then, I think the figure of 95-97% losing, is exaggerated. I read somewhere that at least for one of the firms that their winning clients totalled around 20-22%, which of course is still low, but more respectable than the 95% or so bandied around. But one of the main reasons for this is because a lot of people trade without a good deal of knowledge of the markets; many are effectively going in on a hunch. They think they can just enter a few trades and then few weeks later pay for a flashy car, or even pay towards a house. If it were that easy then, as the saying goes, everyone would be doing it. You really have to treat the markets as a job (with good deal of the winnings kept in the account to gradually increase trade size).

I agree with you that a big chunk of the people who fall in the losing traders category shouldn't even be on the list. The genuine failures are ones who put a good deal of effort in learning market/price behaviour, have a sort of a system (doesn't have to be too rigid) that tells them entry and exit points, money management. Lot of people are just having a flutter and they shouldn't be counted in my opinion.

In any case, in a way it's good that so many lose because it means those of us who are consistently profitable will generate good income. We are effectively winning money off losing traders. This gives us high incentive to be the smaller percentage that stand on the winner's podium.

 

[New Member]

You're telling only part of the story. You simtraded for several months over a year ago, so it isn't as though you hit the ground running five months ago with real money. IOW, you appear not only to have done your homework but to have done it properly. Though it's none of my business, I'm interested in what you did between the time you stopped simtrading and began trading with real money.

There are ways of avoiding the research if you don't enjoy it. Perhaps by now you're ready to explore alternatives.

Db

You're right, I did sim trade. I actually really enjoy the research part but the trading part itself (the watching of prices can get a bit boring as you stare at the screen and wait for things to evolve, especially on low volatility days). However, since I have been able to make good money it's sort of compensated for the inevitable boring passages that you will encounter. I trade FTSE 100 stocks, few selected American companies that I know well, and the FTSE 100 futures. I try to get to know the equities from a technical and also fundamental perspective as well as I can. I of course follow any news items that come out that will have bearing on the stocks and the general trend of the market. However, my trading is based primarily on technicals. It's better to select about thirty or forty stocks and get to know them very, very thoroughly than just trade lots of different markets. There are a lot of people who trade currency pairs but probably have very little idea what moves them. I stay away from currencies. Too complex for my liking.

 

[New Member]

long run you get buried

Of course you can win for a few months

Not really understood this concept. Unless someone gets lucky with some hunch trades, little to no real knowledge of how the markets work, I think someone who trades profitably for a few months should be able to remain so in the long run. What makes someone profitable first few months only to then go on to lose? This concept never made sense to me. If someone knows what they're are doing and are profitable in the first few months then they should remain so, provided they are keeping to form, but if someone gets lucky in the first few months, or catching the beginning of a strong bull run or a bear retreat, then that would be a different story. I have proven I can trade profitably in all market conditions.

 

[mlawson71]

I think psychology has a lot to do with this. People become successful for a few months because they were cautious and smart about their trading, their success gets to their head, they become more self-assured and reckless, thinking they can do no wrong and start making mistakes. And then they lose their accounts. Obviously that is not a scenario that happens to everyone, but it does happen sometimes.

 

[Fugazsy]

Trading is neither easy or difficult, it is commitment.

Many can have a serious of positive weeks/months which demonstrate nothing.

People needs to decide what they want to be: an amateur trader like the most or a professional trader like a few.

To be a professional trader fully commitment is required mentally and in skills as with any professional player in any kind sport.

It takes stamina, convictions, ability and as I said before fully commitment.

Traders are not born, they make themselves.

 

[forker]

5 months is not enough to say trading is easy. Trends can run for 5 months and longer then the market can change and either slop around or reverse. When that happens you have to adapt or your profits will slowly disappear. If you can continue making money throughout these changes then you have something tangible in your statement. Otherwise it's premature

 

[dianajs]

Trading is neither easy or difficult, it is commitment.

Many can have a serious of positive weeks/months which demonstrate nothing.

People needs to decide what they want to be: an amateur trader like the most or a professional trader like a few.

To be a professional trader fully commitment is required mentally and in skills as with any professional player in any kind sport.

It takes stamina, convictions, ability and as I said before fully commitment.

Traders are not born, they make themselves.

I think that how easy (or difficult) trading is depends on the individual. Some take to it easier than others, depending on their individual qualities. That said, I totally agree about it being a commitment. It's a job like any other and in order to do a job properly you need to commit to it.

 

[chocabloc]

Not really understood this concept. Unless someone gets lucky with some hunch trades, little to no real knowledge of how the markets work, I think someone who trades profitably for a few months should be able to remain so in the long run. What makes someone profitable first few months only to then go on to lose? This concept never made sense to me. If someone knows what they're are doing and are profitable in the first few months then they should remain so, provided they are keeping to form, but if someone gets lucky in the first few months, or catching the beginning of a strong bull run or a bear retreat, then that would be a different story. I have proven I can trade profitably in all market conditions.

I doubt you have traded long enough to have experienced all market conditions eg when was you last experiencing delevraging and even then was this " ugly or beautiful " delevraging?

 

[metrader]

Why do so many traders fail?

Maybe they don't have a good system?