WARNING: 95% of day traders lose money. They don't ever make it as traders!
So why are any of us going down this road?
Easy entry...The ability to escape the 9 to 5 rat race...Fire your boss and work for yourself...The markets are fascinating and exciting like an ultimate puzzle...These are just a few of the advantages that make day trading so attractive..
The problem is that most new traders enter the markets without a solid, predefined plan. Even if you think you know what you’re doing, you can quickly end up in perilous terrain.
The Pitfalls of Trading
A common misconception is that you can learn to sense the market direction (like an internal crystal ball). By observing the market action all day every day, you can start to “feel” like the markets are going to a certain level. And often the markets do go right to those predicted levels. After a few correct observations and an experimental trade that makes some money, you begin feeling confident. Based on intuition and the fact that your favorite indicator is also pointing in that direction, you start chasing the market in the direction you believe it is heading. You think you have a system in place. What you actually have is a bad habit that will cause you to lose money over time.
Another big misconception is that you can develop a strategy by identifying the perfect combination of indicators. The reality is that indicators lag. Price trends don’t develop because indicators signal; instead, indicators signal because price trends develop. Relying on indicators is a flawed approach.
So how can you avoid these hazards?
A Bridge to Success
The solution is to simplify. To quote Albert Einstein, “Everything should be made as simple as possible but no simpler.” Trade one established pattern and have the patience and discipline to wait for the markets to meet your criteria. Accept risk on highly probable patterns and let everything else go. A professional trader has well defined strategies with a clear set of rules. Wait for the markets to come to you.
Unfortunately, if you’re a new trader, you have a long, hard road ahead of you. We all enter this arena and start to gorge on the unlimited amount of information out there. We hear the warnings but continue on because we can’t just take a few admonitions as the final word; we must do our own homework. We let being human get in the way of being successful traders. The markets function in a way that is the opposite of all our traits and strengths. Emotions kill our accounts.
As new traders, we come across other traders and their systems and unlimited amount of information. We likely stumble across many good systems along our journey. But we are unable to differentiate a good system from a faulty approach. We don’t know what we don’t know. This is why mentorship is key.
PLEASE CAREFULLY CONSIDER WHAT YOU ARE DOING
If you are in need of money and a new career, then trading with a mentor is your only option. The pressure and psychology of trading is all too great. You can only make it alone as a trader after years of observation—after you develop the ability to sit back and patiently wait for the markets to come to you. If you need to make a trade, then you will be one of the 95% who fail.
The bottom line is that this profession has a lot of negativity associated with it. There are many horrible stories about individuals losing a lot of money and getting themselves into debt, which can lead to financial ruin and broken families.
Trading is great if you can treat it as a career-in-training during the education phase. Maybe you have a spouse who can pay the bills during your education. Maybe you are retired, paying the bills with a fixed income, and have extra money to invest.
Please consider why you are approaching trading. Make sure you are in the right frame of mind and have the means to pay your bills and take care of yourself and your family. Verify that you have the blessing and support of your family to embark on this journey. And find an experienced mentor who can help you avoid the pitfalls and find the path to success.