Over the past years I’ve met a lot of people, who wanted to start trading on U.S. stock exchanges, whether on any other market. Quite a large group of them I met at a conference of DayTrader Event organized by me. Taking into account that the first edition was held in 2011, and with many I keep a permanent contact, I could observe a few repeating reasons that stand in their way to success.
Are you curious what the reasons were? If so, I invite you to read this article.
#1 One-day Millionaires
This way I can sum up the repeated behavioral scheme among beginners, with whom I had contact.
The purpose which we have on the stock-market is one – to make money. However, the road towards it is different in case of persons, who devoted their work and time to it, and different in case of persons, who would like to devote as little time to achieve it.
I called it as one-day millionaire syndrome. This approach regards that in transaction the person wants to earn big money, so waits for such a golden shot.
I will provide here a concrete example often observed in the trading group of RemoteDayTrader, which I manage.
The beginner trader, who risks a bit more, is able during the session to gain in uncashed position 500-1000$. That is quite a pretty amount as for one session. However, he never carries it out (or really rarely). Why? Because for him it isn’t constantly enough! Then I wonder how much he must have in uncashed position in order to close it with a profit? 2000$? 5000$? Or maybe 30 000$?
However, it is unreal for the beginner trader, who plays for example shares to carry out in one position e.g. 5000$. It would equal of 10$ change. Hardly anyone is able to catch such a change, and certainly not a person who just starts on the market.
Looking at statistics, close 100% of such persons lose a deposit (or pays in again, where the history repeats) and after all at least for some time ends his adventure on the market.
And it could look totally different. How? About it below – check it out.
#2 Lack of wider perspective
Amongst traders, with whom I work or people with whom I keep contact (all at the same time who tell me about their successes and failures on the stock-market) I can see two groups. Please take into account that both starting groups are characterized by similar parameters of trading accounts (deposit level, trading capital, etc.):
1. First Group: starting from smaller positions, who want to develop, elaborate their strategy and then to increase played positions Their goal at the beginning are smaller profits, but adequate to played sizes, knowledge and ability.
For a trader from the first group – after reaching stable profits on a level of 50$/daily, a period will come when these profits will be on a level of 100$, 250$, 500$, 1000$, etc. Of course, there will be also worse periods, unsuccessful sessions. However, stable development and most importantly results and development in wider perspective – will allow him to keep up in the market to a moment when will be able to calmly earn on living.
2. Second Group: starting also from smaller positions, however having as we say larger bolls in trading. Hence: able to risk a little bit more, so that results for the first days could already be potentially bigger. However, their knowledge, abilities and way of dealing with emotions is on a level of traders from the first group.
For trader from the second group – the goal from the beginning is to gain larger results e.g. at minimum 500$/daily. This carries a risk, including losses at this level. The problem appears when series of losses comes up. With which unfortunately emotionally not entirely are able to deal.
Both approaches seem ok. However, the difference is how the trader will behave from the first and second group after certain time.
What do I mean? The level of satisfaction with achieved results. I noticed that traders from the first group can much easier handle in bad times. When, for example, trader from average profit of 1000$ decreases to a level of 150$/daily. It is a drastic fall, but trader knows that this is the stock market. You must again adapt to the market, because result is an effect of hard work. He went a long way already, during which he passed steadily on the successive stages of development.
Traders from the second group – who from the beginning tried to play a greater number – much worse handle with a deterioration of results. Why? The answer is quite simple – they got used to bigger numbers. From the beginning e.g. their daily results ranged 500-1000$ or loss 300-500$. However, in the scale of month the days on minus wasn’t too many, so the results were satisfactory. I will mark here that amongst well-known to me persons, the most belongs to a group that very quickly cleans own deposit.
When a worse period appears, the market changes, the strategy no longer is functional – those traders are rarely able to settle with a profit of e.g. 100-150$/daily. Rarely are even satisfied with result of 250$/daily. Simply, starting from larger numbers, they treat it as a withdrawal, as a lack of progress.
I will use a simple example, which presents an average one-day result on a large scale (at about 20 sessions monthly, 3 sessions on minus in the month):
50 $/daily –> 700 $/monthly
100 $/daily –> 1400 $/monthly
250 $/daily –> 3500 $/monthly
500 $/daily –> 7000 $/monthly
1000 $/daily –> 14 000 $/monthly
etc.
Trader from the first group passed these stages. Differently respects earned dollars. In my opinion this group is more conscious of possible fluctuations. As well as can see the development, is more conscious of used strategy in trading. When his profits decreases, will remember what steps caused that he had developed. And calmly will return to a level from which temporarily fell.
The second group, starting from the bigger step at the beginning already alone raised levels. Risking more, earning more. But…. when the market changed, a desire to maintain profits at the same level is high. And it often ended and still ends with opening big positions which are supposed to bring profit in order to keep the average level.
I will add here one more thing – there is also Third Group. It is a narrow group of people who have this extra gift – talent in trading. They don’t fit in any of standards, which I described in this article.
#3 Nobody will work for you
Whether being at school you once were so angry by the fact that somebody else attached to your group and after all gathered laurels for your hard work. In trading fortunately this way will never happen.
Here you are the architect of own fortune (and rather your wallet).
I come here to a certain division listed by me groups:
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One-day Millionaires
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First Group
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Second Group
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Third Group
Do you know what actually distinguishes all these groups?
How many time and work they devoted to success or its lack and quick goodbye with the market.
The pilot doesn’t get into plane after one day of flight simulator. The driver cannot get into a car before undertaking the course or passing exam. The doctor doesn’t operate before graduating studies and obtaining experience.
So why the beginner trader without knowledge, ability, getting to know own emotions and weakness – is supposed to earn on the stock-market?
There are some, because sometimes lucky fate helps to gain profit. But this luck quickly passes, and then real abilities and effective strategy are important.
I cooperated with many traders, who obtained periodically results; they were depended on determined behaviors on the market. Fortunately, these behaviors were systematical. But when the market changed – and happiness somewhere fled – unfortunately the results ordered to stop trade. But why… it really has always puzzled me. Dude, once you’ve been able to this time to earn (ok on a peculiar market, but you did it), so it means that you had an idea for your trading, you managed positions well. The market is changeable, so you should transfer what you played and adapt to the changes. What didn’t you?
Laziness is terribly destructive in any profession in which a little bit of intellectual work is required, as well as regularities and preparations for what is planned. And the same when person forgets that effects of work will come with time – doesn’t appear day by day of what everyone would like.
I never ask other trader what his planning to trade today. Never. And why? Since I have my strategy, I prepare every day for a new session and I analyze what I do.
However, it is an effect which resulted from devoting certain time to build up the routine – such a trading loop:
Education –> Preparation –> Trading –> Analysis
Before I started trading, I devoted lot of time to acquire knowledge. When I already developed strategies (which later were subject to some modifications depending on the market), I realized how important is to prepare for the session. After all, from the sky doesn’t fall signals, I won’t base on ideas of somebody else.
Thanks to preparation, my trading and results became more stable, repeatable plays. That’s all it is an effect of the fact that I analyze what I play, my mistakes or I eliminate in trading what I recognize as the waste of time.
To what I’m heading
If you reached this sentence, I’m very happy 🙂 Are you a beginner trader? And perhaps you play for some time? To which from mentioned groups you fit in? Answer this question for yourself, and then…
How you assess the time spend on education, development, strategy – in relation to your requirements as to gained profits?
Very often persons from the group: One-day Millionaire and some people from Second Group – didn’t devote too much time for education, and want to achieve day by day what other traders or investors. And by that attitude they already at the start clipped own wings. After all, they could be really good traders.
Think about it, if your behavior is described in these two groups. I hope that you will find the time for a moment of reflection, which will allow you to once again with a proper preparation to sit down to trading. This time already seriously 🙂
To which group would you include yourself? What are your observations and ideas to improve trading? Share your experience below in the comment.
