Why so Many Rookie Traders are Doomed

The journey to success, for the amateur trader, is far too often cut short before it becomes a profitable occupation. Typically the outset of the journey is embraced with unrealistic expectation about how easy it is to make money (because that is how it is often, somewhat disingenuously, sold to us), and after a few short months, normally less than six, the initial enthusiasm has wilted and been replaced by frustration and even anger. It is a very, very common story that happens to over 90% of people who decide to try their hand at trading. Yes, professionals make it look easy, and yes, very good returns can be made, but it’s not a quick and easy route to wealth. It takes commitment and it takes discipline. Those wishing to learn to trade must realise this at the outset. It’s when unrealistic expectations fail inevitably to be met that we can so easily turn our backs on what has the potential to be a profitable and rewarding journey.

So, with that in mind there are some fundamentals that need to be put in place at the start.

The first thing is to develop a realistic approach to trading. This means understanding that there are no guarantees, that winning and losing go hand in hand and that quite often the best set-ups will go against us. The market is not tameable.

Therefore, given the unpredictable nature of the market it has to be approached with diligence. What does that mean exactly? Well, amateur trading is often characterised by impatience, wanting to get on with the business of trading and making money; casting around for what look like opportunities to trade and then ‘jumping’ in. It’s quite possible that this approach may yield a few wins, but in trading it’s about the long term, and this approach will not yield long-term profit, in fact quite the opposite. It will only be a question of time before the entire account is lost.

To make a success of trading as an ongoing, long-term means of growing capital a clear-cut and disciplined approach is required. There are three cornerstones that must at all cost be adhered to: A trading plan, an understanding of risk management and the discipline to implement consistently your trading plan and its associated rules. In a way the last, discipline, sounds the easiest and most straightforward, but arguably it’s the hardest of the three.

How does one acquire these building blocks? There is a wealth of self-help material, so much so that it is difficult for a beginner to distinguish the genuinely helpful from the rest. Learning to trade successfully is at the outset very difficult to do on one’s own. It’s important to have contact and feedback with both peers and, particularly, someone with experience and know-how. The unpredictability of the markets makes this particularly so.

Remember, from having a trading plan, an appreciation of risk, reasonable and realistic expectations, and a disciplined approach you will be in a position to build long term profit.