Reasons for failure include:
- No Passion for Trading
- Failing to exit stocks that trade against you,
- Need to be right,
- The unrealistic expectation, thinking as an investor instead of a trader, and
- Simply not loving trading.
No Passion for Trading
When people come into the world of trading many think that they only need to learn a strategy and follow the rules of that strategy. And, there are some people who actually do this for awhile. The problem with those who do not first get a good foundation of the markets is that when the markets change or when they have a drawdown, they start making mistakes. Those mistakes lead to a viscous cycle of getting back your money from market and ultimately lead to burst of trading account.
There are those who are only trading to make money. The process of trading is not enjoyable to them at all. When you do something you do not enjoy, eventually your subconscious mind will figure out ways to make you stop.
Those who start out with passion very often find that those feeling are not there any more when they realize how much work and in some cases sacrifice there is to becoming a trader. When the passion goes, the motivation goes.
Lack of Decent of Trading Capital
Any entrepreneurial endeavor needs money to make the business profitable.Most of Traders cannot be like FLIPKART where you keep showing Losses and you still keep getting money.
Too many people come into the trading business with the idea that the money will somehow appear, someone will give them money or there will not be any losses. Most find out this is not the case. However, I do encourage those with the passion for trading to study while saving. When you wait for the money to appear, you will have lost time in becoming a trader.
I have met a number of people who had the passion for trading that found their way into the business by becoming money managers for others, working in a prop house where money was provided and/or being hired into a trading room. It takes an exceptional human being to make any of these three work without any money of their own.
Lack of Trading Education
There are so many teachers, strategies, books, seminars, workshops and webinars available. Where many fall short is that they do not do the research to choose the best teachers to work with. You will save a great deal of time, energy and money if you decide what type of trading you want to do before you choose a teacher.
Too many choose teachers based on the teacher’s ability to sell them, on the teacher’s reputation for making huge profits or the ability for a teacher to make it look like there will be instant profits with little effort.
First, you need to trade with a trading system and trading strategy. This means you need to avoid all those hot tips,multi bagger ideas,jackpot calls , and ignore the so called experts on blue channels. What you need to do is have a trading strategy that has been properly researched and tested. Then, you need the emotional power to trade the proven idea as is, without fail. Obviously, there are a lot to these two steps, but if you ignore them your trading house might as well be built of sand.
Second, a trading plan is essential to have a solid foundation, BEFORE you enter the markets with real money. What is involved in a trading plan? A good trading plan is written just like a business plan, since if you don’t treat trading as a business, you are destined to fail. So, all the sections that make up a good business plan (Mission, Products, Operation, Strategies, Disaster Plan, Financials, etc) should be in your trading plan. The more time you spend on this plan, the stronger your foundation will be.
My advice to any new traders is to seek a mentor who will offer you trading skills that will allow you to adapt to any market. What works one month may not work the next. But with fully developed trading skills, you can make the necessary adjustments.
Lack of a plan
The market will disrespect those who disrespect her. If you are unprepared, you will be punished. If you lack discipline, you will be reprimanded. The market eliminates those unworthy of participation
A trading business plan will make you accountable for your actions. Many traders do not want to put together a plan because they do not want to admit to themselves that they are working with a strategy that does not work. They also do not want to feel accountable to their strategy. They want to be master traders who follow intuition/discretion before they prove they can follow their technical strategy.
Until you have a plan, you will not reap the greatest rewards from your strategy. You will not be able to fully understand what needs to be adjusted and transformed.
Let us say that you have the passion, education, plan and you have proven to yourself that you have a viable strategy. The next step is whether or not you can follow your strategy. If you cannot, the problem is you. This last step is where most traders fail because they do not want to admit it to themselves, they will not invest in themselves or they have run out of money.
One of my clients once said when asked for the most important lesson that he learned in becoming a money manager, “Handle your psychology first because you are going to eventually have to handle it and then it might be too late.”
Trading is a viable profession and a great way to enjoy the process of making money. If you are willing to do what it takes, then you will be among the six percent who enjoy their lives as professional traders.