Traders fail for a reason. The reasons on why traders fail is of major discussion in the trading community. Here is our top 5 reasons on why new traders fail.
1. Give up too fast
Many new traders fail in the first few months due to lack of profit. It is of extreme importance that a new trader understands that it takes at least 2- 3 years to get to find a consistent strategy let alone understand the market.By trading you’re going to go through many ups and downs. Its only through the downs you learn more and learn trade better. The more you go through these cycles the more you become a better trader.
2. Lack of proper strategy
A good consistent strategy is found by experience and good research. Good research involves substantial amount of time and good record keeping to find the little nuances we can improve. This study is slow and takes substantial time. But as time progresses you’ll learn to tweak the strategy week by week and thus improving your strategy. Every time you have a bad trade look back into your strategy and find whats wrong and try correcting.
3. Not having a niche
A niche in trading is rarely discussed in the trading community but is probably the most important thing a person needs to do. By niche i mean finding the right situation to trade. This means having an expertise in some situation like say a Non farm payrolls or Central bank meeting. This can also be a technical trade situation as well, like say Inside day breakout. Mastering trading any of one of these days can benefit you in the long run. Say for instance you have mastered how to trade Inside day breakout or False breakout. All you have to do is to wait for an inside day to come around all year. On average on the E-mini S&P 500 you can expect somewhere between 20-30 inside days. On the Eurostoxx 50 and German Bund this can be 30+ each. So if you trade the inside days of these 3 markets your looking at a trading occurrence of 80-90 days. You don’t need to trade any other days just be patient for the inside day. Find your niche!!!
4. Trading too much
One of the major mistakes a new trader make is to trade a lot. This is extremely beneficial for the brokerage house and they love a new trader. Know when to trade and when not to trade. Once you have a good strategy stick to it and only trade at those times strategy can be applied. Be patient for that situation to come through. Say for instance in the previous niche discussion we talked about inside days. You wait patiently for days for than inside day to come in, at which time you use your strategy. Preserve your capital. The more you play this trading game the more you learn. If you trade too much you’ll loose fast and you will not have time to learn anything.
5. Starting off with a big account
Having a small account to start off with is far better than having a big account. Keep it so small that even if you go bust you can come back at it. When you have a big account like half of your life savings, when you start loosing big time it will hurt you so bad. And when you go bust you’ll never come back to the market. In order to learn you will have to experience the failures. If failure is too big it will be hard to come back to. In these days of CFD trading you can start off with a small account, get an exposure and then start to build some consistency and experience. Once you achieve those and start building some decent percentage returns on your monthly statements you can then start trading a bigger account on many of the futures exchange around the world.