Statistics say that over 95% of traders fail. We read that all the time and it really shows up in marketing material for the latest and greatest trading system.
That number is enough to make anybody doubt their ability to find trading success.
For all the mention of 95% though, it does bring up some important questions and highlights an aspect that you must have to have any chance of success.
Definition Of A Trader
For a few hundred dollars, anybody can open up a trading account and buy/sell an instrument. Using the following standard definition, that would make this person a “trader”.
“A trader is person or entity, in finance, who buys and sells financial instruments such as stocks, bonds, commodities and derivatives, in the capacity of agent, hedger, arbitrageur, or speculator. – Wikipedia”
It doesn’t matter if the person found their way into the markets via a $97 e-book or through years of training and experience, they are grouped into the same category.
It also does not matter if person A is losing money and person B is making money. They are both classified as traders.
Football player: A football player, footballer, or soccer player is a sportsperson who plays one of the different types of football.
If someone asks what I do, if I own a football and play on the weekends, I certainly would not say I am a football player.
Saying I was a football player would suggest I play football for a living…which I don’t…but the definition fits.
The question becomes: When can you call yourself a trader?
I don’t have an exact answer that will suit you because we are all different but I think it’s an important question for you to ask yourself.
Some ideas that you can ponder:
- If you reach a goal that you set for yourself in terms of consistency
- If you have taken a laser focus approach on your trading method, trading risk, and trading psychology.
- If you are displaying the same characteristics of certain traders you admire.
If this all sounds like semantics, that’s fine. In the trading world, I think it’s vitally important to be very clear on all aspects of the business from your trading method and risk all the way down to labels.
Definition Of Failure
In order to say someone has failed, we must know what the ultimate goal was for them.
- If the goal for someone placing a trade was to be able to meet all financial obligations in their life, they fail when they give up on that quest due to pitiful results.
- If the goal was for extra income to cover a car payment and they meet that goal, they didn’t fail. They succeeded.
Is a blown account a sign of failure?
Any trader that has found success has probably lost money and no doubt has had to replenish their account. They didn’t fail with a blown account if they accounted for that occurrence and had a plan to continue on the road of experience. Planning on losing money as you become educated is rooted in reality.
The question becomes: When can you say you failed?
Again, that is up to the individual however I believe the 95% statistic comes from brokers where traders are losing more than they make. Still, I don’t believe you can call them “failed traders” until the time that they close up their trading business.
It is never a direct line to profits when you begin placing trades. Many times during the start you will lose more than you win.
It will be tough.
It will probably take a few years to gain consistency.
For many, it will be the toughest thing they have ever attempted.
More Than Making Money
You’re are going to lose money at first and if an equity curve that heads north is your expectation and a measure of your success, you are going to be disappointed.
You are going to be frustrated and feel like a failure. You will fall into all the traps that finish off accounts such as revenge trades and too much risk.
You need something else that will keep you fighting for your dream and that is an absolute passion for trading and everything that makes up the business.
Passion is the only thing you can’t buy when it comes to trading. It can’t be taught.
From the analysis to the record keeping and review, you will want to approach your trading desk with passion. One of the reasons there are only so many professional athletes, high end surgeons, top business people, and of course successful traders….is they have an undying and strong passion for what they do.
Ignore the 95% failure rate. It is a number that can not be quantified. The only thing that can be….is how you approach what you do and the results you get.
Everything else is noise.
For more updates from Mark and the team at NetPicks, be sure to visit their trading tips blog at NetPicks.com.