If you have done your research, you already know that the odds of being a successful trader are against you. I have heard that 90% of traders lose 90% of their accounts in the first 90 days. It’s a well-known fact that the percentage of consistent winning traders is less than 5% in the markets on average. That is a ridiculously small percentage considering the number of traders that participate in the markets.
In my opinion, there is a reason for this. A big challenge traders have is not staying in simulated or demo mode long enough before they start trading a live account. Very commonly a trader will have a short period of success and think they’re ready to go. When in fact they’ve only traded a portion of the market that was most likely is in an impulse wave. Or many call it beginners luck. It can also be a curse, much like a gambler looking for the high of the next win instead of the process that got you there. Trading is a process, it’s not luck but there is some common sense and intuition involved.
Much like playing an instrument, one has to first learn to read the notes on the sheet music, then play the notes on the “Guitar” to create a song. This requires hours of practice and patience. Even then everyone needs to take their own time and will reach different skill levels. Once you have enough time and practice that is required for you, then you will be able to play or write your own music without having to read the “sheet” music.
Here’s another analogy:
Think about how many hours a professional football team practices before their games. Imagine how much practice time versus the amount of time they are in real game. Do you think athletes only give it half an effort in practice- NO they give it their all so they can become their best, so they have confidence and know what to do when game time comes. They have a game plan and know how to execute it! That practice and dedication are what make them great when they do get their opportunity to play.
So, to understand that the markets have several different patterns, there are not just a few plays in the markets book. It takes time to observe and see these patterns. Then you will have the ability to recognize them before they happen and as they develop. This can only happen with practice and looking at a lot of charts. It has been said it takes at least ten thousand hours to be a master at any trade or field of study.
Many times, traders come into this arena with a very unrealistic expectation from the markets. They think they will just make money and all you do is buy and sell, seems simple enough! But once they have real money in the market everything changes. The “survival/primal brain” takes over and your decisions are no longer “system-based” you start to trade your own belief systems. Traders can gain experience with the markets with demo trading if they take it seriously. So many times, I hear “it’s not real money so it does not matter”. Those are the traders that never make it because they are not willing to do the “groundwork” before expecting to be a top player.
Another vital reason for paper trading is to gain an understanding of the way your system works. We all need time to adjust to a new approach and to make it fit our working strategies and lifestyles. As with any new endeavor, there will be a learning curve, some will have more than others, this will depend on the trader and application of the system. I suggest at least 6 months of paper/demo trading before putting real money in the market, and that is only if you have made money on paper for at least 4 out of those 6 months. If you can’t make money on paper in demo mode, then how would you expect to make it in a live account? I have been surprised at how many traders make this mistake repeatedly. Risk management is another item that needs to be worked out in demo trading, to be sure you understand how orders work, how to calculate your risk, and how to effectively implement your analysis. Understand your system’s risk loss ratio and if you don’t use the risk management and follow it, then you are just gambling. Trading and gambling are very different and should be treated as such.
I can’t say it enough, take the time to do the “work” practice, be consistent, and don’t have unrealistic expectations from the market, or you will set yourself up for failure before you even begin. Many people spend 4 or more years in college and hundreds of thousands of dollars on an education with an expectation of a good career or job for life. Trading does not have to take that long or be that expensive, but it still requires time, practice, patience, and a real commitment to get the end result you desire. I can say that the people that are successful have no limits as to what the markets can provide, or what they can make from the comfort of home or office, boat, or even a plane! The sky is the limit.
Trading truly is the only “mental” performance arena/platform that I know of in which a majority of the participants (traders) expect to spend less time in practice/demo mode and expect to become successful at making a living trading. No wonder why so many people lose money.
If trading is truly your passion give it the time and effort that you deserve to be successful and reach your trading goals.
The PROFITUNITY Trading approach helps traders manage all of these issues and create a trading plan that fits their belief system and risk profile. Let us know if we can help you reach your trading goals.
For more information contact our office.
May All That You Wish For Be The Least you Receive