This is a Guest Post by Akil Stokes
There’s an old saying in the trading industry that goes “90% of traders will lose 90% of their money within the first 90 days of trading.” Whether these numbers are accurate is debatable, but something that we can all agree on is that the failure rate of prospective traders is extremely high, and the question is why?
In 2011, a study was done which analyzed over 12 million trades and it was found that most traders had an average win percentage above 50% showing us that the average trader wins more than they lose. So, if the problem isn’t finding winning trades, then what’s causing so many traders to ultimately fail?
In my opinion it has to do with having unrealistic expectations & lacking the ability to deal with adversity. Many traders think that trading is easy, that it will take minimal time to learn and that the journey to becoming a millionaire will short and sweet. The reality is, trading is more like trying to become a professional fighter meaning that it’s going to take a massive amount of time, effort & dedication to transform yourself to the point where you can even start thinking about success. And even once you’ve started seeing the signs, you’ll have to work even harder to work your way up the ranks before you can see that big payoff.
I want you to engrain this in your mind. EVERY FIGHTER GETS HIT. The first thing that I tell a new trader is that they better get used to taking losses. Any professional trader will tell you that win percentage is highly overrated and that there’s no such thing as a perfect system. All systems and strategies take losses, and you’ll never be successful unless you come to terms with that. At some point in time every fighter will get hit, that’s part of the game. The important thing is limiting the amount of damage you take and of course, avoiding that knockout punch.
PICK YOUR PUNCHES WISELY
Overtrading is also a major issue for many new traders and for the most part it comes from the trader’s lack of patience and their desire to make money quickly. Trading is often portrayed in a similar light as the latest Fast and Furious movie, meaning nonstop heart pumping action and excitement. Therefore, when newer traders aren’t actively involved in the markets, they get the sense that they are missing out and therefore force themselves to participate whether a setup meets their plan or not. Not having a plan is essentially stepping into the ring without training and having performed zero research on your opponent. Without prepping for your fight, you have no clue on how to attack them and more importantly, how to defend yourself.
HAVE A PLAN AND EXECUTE IT
In 1974 the great (and late) Muhammad Ali, fought the undefeated George Foreman in a boxing match referred to as the “Rumble in the Jungle.” After training & performing a massive amount of research on his opponent (aka back testing) Ali became very familiar with Foreman’s strengths and weaknesses. Ali’s strategy in this match was to lean against the ropes and absorb the bigger and stronger fighters’ punches causing him to tire. After taking viscous blows for eight rounds, Ali took to the offensive and ended up knocking the exhausted fighter out.
Becoming an independent consistently profitable trader takes the same type of discipline and commitment that Ali demonstrated. If you want to earn success you have to have a plan, and not just in the micro literal sense referring to your specific trading rules, but also in the macro sense in asking yourself “how am I going to put myself in the position to earn long-term success?” Ali decided that he needed to sacrifice 8 rounds or so, for him to achieve victory. In trading we need to make similar sacrifices. We need to sacrifice time and energy to first learn how to trade. Then we need to sacrifice even more time and even more energy to create and back test our trading strategy. Then after that, we need to sacrifice even more time & energy practicing in the live markets just to have a slim chance at becoming successful.
Success doesn’t just happen, it’s earned. It’s truly an investment because it means sacrificing a lot now, for a potential future payoff. However, if you were to ask Ali If the 24 minutes of pain was worth the legendary victory, I don’t think he’s hesitate to say yes. And I would ask you the same question. Is the payoff worth the sacrifice? Yes it‘s a massive investment, but it’s an investment in which you fully control the outcome. I don‘t know about you, but I’ll take that bet every time.
You can find more from Akil Stokes here
Professional Forex Trader & Trading Coach
Twitter/Instagram/Facebook – @AkilStokesRTM