Realistic Expectations, Discipline and Aptitude - Stock Trading Forum | Forex Forum

Ken · #1 (**permalink**) 02-10-2010, 08:07 AM

Not trading successfully? That's normal. Here's why:

I got an email from a trader who was frustrated that they were not yet successful at trading. Part of that is having realistic expectations; the challenge is that many of the bad vendors in the trading industry try and sell "automated" trading promises, using software/robots, or sell the promise of easy trading riches... or traders may see the rare exceptional person being successful in their trading, like myself, and mistakenly think that they can achieve similar results within a short timeframe (eg under a few years of study).

Think of it instead like a complex, difficult profession, where the 3-4 years of learning at a university is just the start; then there's on the job training independently that takes additional years, and after 5+ years of hard work, one may (though still not likely) get to be a 'scratch' (breakeven) trader.

The truth is it's very hard, and takes years to learn and struggle with, even to get to break-even. Most never succeed, typical customer/trader results are that none are successful, and all will lose. Does that differ from your expectations? Some people are not very patient, nor as hard-working and realistic as they need to be (much of that is due to unrealistic expectations that some trading vendors make, which causes traders to mistakenly blame themselves if they don't start making trading profits within a few years). Many traders blow out trading account after trading account, never making it. It's not easy.

Here's my thoughts on it:

TIMEFRAME TO LEARN TRADING:
Trading takes years to learn, and most people never make it to profitability (which is why neither I nor any trading educator can promise trading success, especially in a short timeframe such as a year or two); none of this is something that one learns quickly: most people take many, many years to learn trading; it's an ongoing skill, as a realistic expectation.

Even after 10+ years I'm still learning new things myself. It's best thought of like any skill set for a complex field of knowledge (like engineering or computer science); it's something that takes many years to learn, and with trading since it's a speculative, high risk, complex activity the vast majority of folks struggle with it, for years, which is normal. It's important to have realistic expectations I believe, and to expect to take years to learn how to even break even at best.

Realize neither I nor any trading industry provider can assure you of success nor should you over-rely on any single person, because most folks who try trading do not succeed, as it's very difficult. It's tough, most will never even do much better than break-even, and most lose.

APTITUDE:
Note that most people simply aren't cut out for trading. It requires an almost fanatical attention to detail, rapid decision making skills and rock-hard discipline to manage money properly for taking stops, as well as profits. Most adults don't even have written goals, much less the ability to constantly make data-based decisions in their businesses and personal lives... even less so for high-pressure trading, where money's on the line.

Personally I have two degrees (UCLA/CSULB) and a background in statistics in production and quality engineering environments. I am highly trained to use data and charts to make decisions, so I found success in my own trading, eventually, after a lot of hard work and study and practice and testing. But people like me who have made successful trades are definitely in the minority, compared to the masses who attempt trading. It's not easy, nor should it be. But most will simply blow out their accounts and leave the markets frustrated, years before that occurs. That's the truth; one that the vendors don't acknowledge, and traders often don't want to hear.

Ask yourself:
+ Do you have an intense attention to detail, metrics and quick decision making skills?
+ Are you prepared to take years to learn, with no promise of success at the end of the tunnel?
+ Do you have realistic expectations, that this is much closer to engineering and computer science (years in college, then years more in practice before skill is developed, and even then there's no guarantee of success)
+ Do the trading vendors you buy things from acknowledge this hard reality of trading and are upfront with you about it?
+ Do you personally have the discipline to tolerate risk, execute trades mechanically, and have the patience for this?

The truth is, like entrepreneurial success, most people simply don't have the time nor the skill set, the capability to learn everything that's required. Like starting a small business, 90% (?) fail. For a variety of reasons. The same is true of trading. What do small business owners have in common with traders? Actually quite a lot. They're brave, willing to take a risk.

The SUCCESSFUL small business owners know multichannel marketing, how to franchise and leverage their processes, how to have a workaholic mentality and realize it may take 3-5 years just to reach breakeven (but if they're in the wrong location or selling low-demand commodities that a big box retailer can offer at lower margins, they still go out of business despite their hardest work and good intentions).

Similarly, successful traders realize that it takes years to learn, that not everyone is cut out for trading, and that it's high-risk, speculative in nature and not something that anyone should be planning on for a steady income. It's in the high-risk gaming category of things people can do... by learning proven strategies, some traders can potentially do better, but the fact is most traders will simply never make it. Not to say you should give up -- but you should have realistic expectations and understand going into this, that most won't make it (like a tough bootcamp/military school that washes out 90%+ of it's recruits, or a small business -- most don't make it).

WHO TO LEARN FROM:
It's a good idea to give preference to educational resources, trading vendors who can prove they are actually real traders. This is easily ascertained by simply asking for brokerage screencap recent PROOF of actual trade examples they've made, like I provide on this forum in the 'real trades' thread. This helps ensure you're not learning from the 99% vendors out there who are opportunistic marketers and don't actually trade (or trade successfully). Authenticity is important.

Here's how I honestly feel about things (and why I, a real trader, started Daytrading University myself back in 1999):

http://www.AdxMastery.com/WhyLearnFromRealTraders.htm

Having said that, it's also important to not just become dependent on any one vendor. Be a sponge and learn as much as possible; just give more weight/credibility to those who are actually proven real traders.

IT'S A LOT MORE ABOUT MATH AND POSITION SIZING, THAN CHART PATTERNS:
It took me many, many years to realize this. You've got to trade small (<1% per position initially), and scale up dynamically w/position sizing, and keep risk tight using percentage or dollar-cost drawdown stops, as a core trading approach. The chart patterns are helpful in scanning for entries and exits, but most of successful trading is about the MATH and POSITION SIZING, not chart patterns.

TAKE PERSONAL RESPONSIBILITY FOR YOUR TRADES:
In many professions, there's a tendency for some customers to not want to take full responsibility for their personal success or failure; eg they "do what a guru says, and if they succeed they praise the guru, but if they fail, they blame the guru for that, too". Don't be one of those folks. Take personal responsibility for all your own trading outcomes. You should never become solely dependent on any one learning resource -- the majority of it is still up to you.

For those that do, it's a lot of fun, still hard work, years later. That's one reason I suggest people papertrade (or small-share trade) as they learn, to see if a) they're cut out for it, b) they can make it work for them. Trading isn't for most people, no matter what the vendors out there say. Don't trade with live capital til AFTER you can successfully papertrade for a year+, and then start with small sub-10 share (or micro-lot for fx) trades, for another couple years, before scaling up. Be careful!

JPINVEST7 · #2 (**permalink**) 02-10-2010, 11:06 PM

Thanks Ken for the Information, it's encouraging.

Ken · #3 (**permalink**) 03-29-2011, 01:28 PM

(email sent March 29th, 2011)

Setting realistic expectations about your trading activity is
very important... because most traders will never make money.

Are you trading with realistic expectations about your progress
as a trader?

I just got an email from a smart trader today, asking me for
encouragement, and telling me of his goal to make net winning
trades of $80+ a day, after learning for just a year.

Folks - you've got to understand that no matter what, most people
will Never make money trading. Typical results are that all traders
lose and most folks will never make money trading. Those that do,
have usually spent many years learning the profession.

The trading industry vendors out there who talk about easy profits
or easy money just aren't being straight with you. Trading is
exceptionally difficult, and fact is that most people will never
become net profitable at it. No magic software, nor spoonfed
live room nor alerts, nor other "silver bullets" will make one
a successful trader.

Then why bother trying?

Because the potential Is there, though most never get to where
they make more winning trades than their losses. They wash out
far too soon, taking large stops, chewing through their accounts
before they learn the SKILLS and pattern recognition and timing
abilities it takes to win. They chase guru to guru, or software
program after program, trying to win. Without learning to master
the very difficult skills involved in actual trading.

My email reply to this trader I just sent a few minutes ago:

What I said to him was almost certainly not the answer he wanted
to hear (he had hoped for encouragement), which was the truth:

"Most people who try to day trade lose their money because it's
very high risk speculative activity and even after years of practice,
typical results are that all traders lose and are not profitable.
Sorry I can't give any encouragement, but that's the reality of the
situation. It's speculative and unrealistic to expect you can make
any money net profitably at this, for most people, ever... and even
for those with a lot of experience, it takes many many years best-case
to even hope to break even.

Average / typical results are that all traders lose their money and
most do not ever become profitable. What keeps many in the game is
that they enjoy it, that it's something they like practicing at, in
hopes of getting better. But most people will always lose money and
never make it at trading, whether it's day or swing trading or any
other type of trading. It's best looked at like going to Vegas for
fun and entertainment -- day (and swing) trading is highly speculative
and risky, not something to be pursued as a serious money-making career
initially, particularly not without many many years of practice and
hard work. And even then, most don't make it."

TIPS:

#1: Don't be overly aggressive or impatient in your trades; like
any skill it takes years to get better at it, so you're best served
by paper trading, at minimal risk, for many months, to test out and
get the hang of things before risking live capital

#2: Think of it like playing texas hold 'em -- if you're sitting
down at a table and you haven't been a skilled player for many
years, you'll just lose your money / chips to more experienced folks
(you've got to 'pay your dues', hopefully at minimal cost while
you learn).

#3: Despite what vendors say, you should not expect to even think
about making money trading until you've got a minimum of 3-5 years
constant papertrading/practice experience under your belt.. and
even then most traders still lose their money (for a variety of
reasons, like failure to manage risk correctly, or not knowing
the 'mechanics' of skilled trading).

#4: Think about your trading as a series of progressions, where
you're slowly, gradually making minor improvements to how to
decide to enter, exit, scale up and manage your trades. It takes
YEARS to learn all the nuances of successful trading. This is
not something simple to grasp. Nor a popular message.

Heck I'm a former corporate statistician and quality engineer,
and UCLA/CSULB two-degree 47-year old man and it took me many
years to just begin to understand the skills involved in trading
with a consistent, strategic approach (plus learning all the pattern
recognition skills).

So my message isn't to burst your bubble about trading, but rather
to give it to you straight -- most will never make it, no matter
what you learn out there... and for the few who do, it will be
at the end of a long, hard multi-year learning process, if at all.

Have fun with trading... it's speculative, high risk like going
to a casino. But if you want to get good, you have to learn from
the best out there, and see if your skills are up to the challenge.
Then comes the hard work. Make sense?

Don't beat yourself up if you don't make money trading your first
few years. It's like going to Vegas and sitting in a poker room
with guys like me who've been playing for decades... you won't
win at first, at least not consistently (if ever). You've got to
be realistic about the years it takes, and look at those of us
who are skilled educators (and real traders), as a resource to
share what we've learned.

But ultimately you're all alone out there. You've got to find
your own way as a trader. Nobody selling you stuff about trading
is going to "make it" for you, and you shouldn't become overly
dependent on anyone. I want you to succeed, so realize it's not
easy. I hope that makes sense.

Remember what I said. Most won't make it out. Those who do,
will have taken years to learn, and have insisted on taking the
hard, long way to learn this like a professional. No silver bullets,
no magic software, nothing like that is real. It's a lot of
sequential trading skills you've got to master, to even hope at
having a shot at making it in trading. In the meantime, trade
small (or paper trade), look at it like a journey not a destination,
and realize we've all got a lot to learn, about ourselves (our
personal discipline, successes and things we've got to get better
at), and about the markets.

Here's to the journey!