A quick search of the internet will uncover thousands of articles that proclaim that most traders lose money. There are even some unsubstantiated statements that as many as 95% of day traders lose money and that most are no longer trading within two years. These statistics don't provide a definition of 'trading' and a wide variety of markets, such as currencies and commodities are lumped together, but the numbers do make it clear that trading is extremely difficult and the risk of losing money is very high.
The story on social media tends to be the exact opposite. If you simply read posts on Twitter (TWTR) or Facebook (FB) about trading you would come to believe that trading is extremely easy and that many people are racking up substantial gains on a daily basis. The irony of this mischaracterization is that it makes it even more likely that those that follow will lose money.
The truth about trading is that it is substantially more difficult than social media would have you believe but it also is not a sure path to losses that the statistics seem to indicate. The reality is that trading is potentially so very lucrative because it is so extremely hard. If it were easy we would not be able to make substantial money doing it.
The first step on the road to successful trading is to recognize how extremely difficult it is. Once you acknowledge and embrace this fact, you can then work on developing the necessary knowledge and skills to be good at it. Far too many traders start off with a 'get rich quick' mindset and they soon find out that success comes from slogging away day after day. There will be a steady stream of losses no matter how good you might be, but if you persist and are very disciplined the rewards will come.
The traders that tend to fail the fastest are those that have a gambling mindset. They think of trading stocks as similar to betting on sports or sitting in a casino. While there is a large amount of luck involved in trading, the best traders deal with it in a systematic way and are always careful to control their risk. Protecting trading capital is always the ultimate goal of traders that are in it for the long term.
One gentleman, I work with at SharkInvesting.com is a retired airline captain with a military background. He has developed a day trading system that has produced very steady positive returns for him. His secret is that he is highly systematic, controls his risk, and - with a little help - finds a steady supply of 'good' stocks to trade. He never underestimates the great difficulties involved in what he is doing and is constantly pushing to improve his results. He had no delusions about it being easy and stays highly selective when making his trades. He is his toughest critic.
To be good at trading you must fully understand and embrace the idea that it is extremely challenging and that you will lose money at it on a very regular basis. Once you internalize that thinking then you are in positions to develop a way to be successful at it. You can never take the market for granted. You always have to be on guard with the mindset that it is going to steal your cash if it is given an opportunity.
The odds of being a successful trader are only against you if you fail to recognize the amount of work and effort that it takes. I'm convinced that anyone can be a good trader if they have the necessary work ethic and cultivate a 'problem solving' mindset.
If trading wasn't very hard it wouldn't be so potentially rewarding.
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