Good afternoon Traders,
I need to first sincerely apologize for the tone of this article, but they are words that no one will tell you. I've created my YouTube and Twitter for the sole reason of helping people unconditionally, with no strings attached, and without the purpose of benefiting monetarily.
I wanted to write about the harsh reality of trading and why many people will fail. Now let this sink in and understand it fully before beginning your trading journey.
This article isn't to discourage you, but rather, give you insight on why people fail so you can improve your skills.
Knowing how others have failed, will lead us to success
Let’s think of the allure of trading. It's a chance to escape our reality. A chance for new beginnings. It’s not surprising that many people would love to quit their day jobs and support themselves by simply trading stocks for a living. “Can we make a living off trading cryptocurrency?” The short answer is yes, but the fact is that 95% of all traders will fail. It seems almost too good of a fantasy to make a living off trading stocks. Though it certainly is possible; probable? Now that’s a different story.
Imagine the idea of staying at home to work, where YOU are the boss.
You’re financially free and secure. Though, it requires a very specific skill set, has an immense learning curve, and you must have the ability to take lots of “pain,” which are skills that most people simply don’t posses or will develop.
Let me take you back to the days when I first started trading 2 years ago,
First my background. 7 years of school with a background in Mathematics and Mechanical Engineering . I was trading for 1 year and 6 months part-time, while working in my career field. One day, it just “clicked,” and I realized it was costing me more to be at work, than to trade at home full-time. It was the most beautiful day of my life. My Ethereum, purchased at a mere $10, reached all-time highs of around $350.
Am I a "professional trader?" What is a professional trader? Is that someone who works at a firm? Someone who manages other people's money? Someone formally taught?
The definition is broad. Though what I can tell you is this
I'm a full-time trader who does this for a living and can sustain myself. I'm a self-taught trader that loves books and videos on the stock market and my favorite topic is Elliot Wave Theory.
I can with certainty say that I've put in more time, effort, and studying, into my 2 years of trading, than my 7 academic years.
I have an addictive and competitive personality. Trading to me is a video game with complex puzzles that I love to solve. Trading is a life-long learning process where I accept my mistakes, refine them over time, and recreate strategies that fail.
The skills from school helps me to learn from my mistakes. I like to find out what are the right questions to ask, how can I find out what to learn, what are successful people doing, what are unsuccessful people doing, and what can I do differently to improve my skills. I see trading as mathematical statements,
“if this, then that,” or, “if and only if this, then that,”
with choices that must be made, with strict rules and guidelines that I must adhere to, with probabilities that must be analyzed, and with risks that must be managed.
So am I a professional trader?
Nah, I don't see myself as one. Just some guy who's obsessed about his favorite video game that pays out real money. I see myself as very lazy actually outside of everything that doesn't involve trading.
I firmly believe that our responsibilities are directly proportional to our compensation.
Trading requires a level of excellence, unparallel to any professional career I’ve had.
It is the difference between being all-star athlete, and a last string player. The difference between being a movie extra and an Oscar-winning actor/actress. Between a weekend gig musician, and a rock star.
The dream of becoming a full-time and successful trader, who’s financially stable, and the allure of how easy it seems, are two separate entities that one must differentiate.
Trading is difficult. It has the learning curve equivalent to the most difficult professions, requiring the ability to develop a keen eye, constantly learn and grow, refine strategy, and teach one self. There’s not a good chance that someone will one day wake up and say, “I’m going to quit my job to become an astronaunt,” or an astrophysicist, or a race car driver, because we accept and understand the fact that those are far-fetched ideas, requiring immense work and knowledge. Though trading, is a different story. The idea of putting in XYZ amount of money in to yield substantial returns seems easy and is why it attracts more people to this profession than any other.
“Let’s just pick a few good stocks. Buy low and sell high.”
Which is what most people will do after seeing a few basic videos.
To be a successful trader, you must first develop a strong routine and the discipline of a monk. You must know how to learn, what to learn, and learn from your failures.
Please understand is that there are winners and there are losers. Accept that fact. We must lose to learn valuable lessons, but we win more over-time and that’s how we profit. A successful trader knows they’ll lose money, but it’s how we minimize those losses, by cutting them fast, to prevent small losses into catastrophic ones. It is the profit over time on winning trades that will make up for their losses.
Here’s a perfect example of what 95% of traders do. They will enter a position, and simply hope. Then when the market goes against them, they have no idea what to do and will think,
“I’ll just hold it. It’ll come back.”
Trading is gambling. Fact. We may get a taste of a few wins by simple luck, whether it’s from taking someone’s advice or picking lucky a coin. If a solid strategy isn't implemented, the luck will catch up to you, like playing slots at the casino. You must understand that you're playing a game of probability and the beginners luck will run out. But what separates the big boys from the little league is consistently winning over time.
The odds of anyone becoming a successful trader who can do it for a living is extremely small. The odds are stacked against you immensely. Trading is competition in the free market. For every winner, there is a loser, and for every time someone profits, someone loses their investment. Please understand this. The money doesn’t come from thin air. You are directly competing against incredibly talented and smart people. If it were that easy, everyone would be doing it. But it’s simply not. I’m desensitized to the fact that every time I profit, I’m literally taking someone else’s money.
There are many topics that require 1000+ hours of hard work to master. One does not get a university/college degree by watching a 30 minute YouTube video. If making $50,000, or $100,000, or $250,000 a year trading by watching 5 hours of YouTube videos was easy, everyone would be doing it. Though once again, people are sold on the dream that it’s easy.
The most common mistakes that people make are:
Unable to control emotions
If so many brilliant and intelligent people trade, what differentiates the better ones? The answer is quite simple. Emotional stability and control. We must LEARN TO STAY IN THE GAME and check those emotions, by acknowledging our stop loss. Trading takes advantage of the two most basic emotions. FEAR and GREED . Until we master these two emotions, panic will overwhelm you as a trader. You always need to have a game plan first before entering, so you can also know where to exit. Once these plans are in place, your emotions need to be neglected. Stick with strict discipline to a mental or hard stop loss. Cut those emotions and losses fast. Never buy because of FOMO (fear of missing out). Those that can't control their emotions, will unfortunately be overwhelmed when things go south, which is a wonderful way to deplete your account. Our emotions must be tossed out the window, and instead replaced with rationalization through detailed and well-thought out processes. I want to highly emphasize that "holding and hoping," doesn't work.
Not understanding what risk management is.
Trading is a game of probability. We must manage our risk accordingly, and take high probability trades. I can guarantee that 99% of traders aren’t sure what a stop loss is or what risk management is. Those that enter a trade, it goes south, then simply hopes and prays, will have left the game as fast as they’ve entered. These are the most important topics to understand; how to reduce risk, how to shed risk, how to take high probability trades, how to patiently wait for the right setup. These are topics that must be researched for months on end.
Starting with too much money.
Valuable lessons unfortunately come at an expense. We don’t have to learn these valuable lessons at a costly price. Start only with what you're comfortable to lose because I guarantee that you will blow your account at one point or another. I don't know a single successful trader that hasn't gone through tons of money to learn these valuable lessons. Start with $50, with $100, with $500, whatever you are comfortable to lose. Keep in mind you must first get your feet wet before going all in.
Following people and asking what to buy, when to buy and when to sell.
The people with this mentality:
“What should I buy? When should I buy it? When should I sell? What’s a good coin to invest in?”
Are all people I can guarantee will fail
Never have I once asked anyone these questions, even back when I was a new trader. Why? Because I would rather trust myself than to trust someone random. It's MY MONEY and I'll decide for myself where it goes. Even if it's the wrong decision. You MUST understand that concept.
We must learn how to critically think for ourselves and perform our own analysis. Seeking financial advice is a big no-no in the trading world. Being unable to think for ourselves, and relying on others, sets you up for failure.
Playing much larger position sizes when not ready.
We must start very small for the experience. Like anything in life, we take little steps at a time to improve our skills. Jumping head in first to trade is a recipe for disaster.
Remember that only certain personality types are suited to trading;
risk takers, self-disciplined and comfortable with market volatility (seeing your profits / losses swing in major fashion). Having extreme patience with realistic expectations is another key skill to possess. Unrealistic expectations quickly lead to frustration when they aren’t met.
Find a trading style that fits you, and your daily life.
What works for others, may not work for you. Don’t neglect the learning curve. You must dedicate the time every day to learning something new and do this for years, before expecting any consistent return. Make active improvements as a trader and constantly learn, grow, and develop those skills. You must process-oriented and forward critical thinking skills And especially:
DO NOT INVEST WHAT YOU ARE NOT WILLING TO LOSE
Now that we’ve cleared up the harsh realities of trading, please consider the costs and risks involved before laying real money on the line.
Those that try to trade and want to be successful, stop following people, and start learning for yourself. Put in the hard work. Life is not easy. The odds are entirely against your success, but if you’re one of those that can master this art, the reward will be unbelievable in every way.
And remember my advice.
RISK MANAGEMENT IS THE BEST AND MOST IMPORTANT TOPIC TO LEARN
Ask yourself, deep down. How badly do you want it? With determination and hard work, like anything in life, they're within reach. Good luck to all that wish to pursue happiness through the trading life.
Feel free to follow me on YouTube and Twitter, where my focus is on improving the cryptocurrency community by teaching and being supportive with detailed analysis.