I was watching a newscast today and the reporter claimed that 90% of all people who embark on a career of futures trading lose all their money within three months. The story went on to sensationalize these traders plights by claiming that the hapless trader spent the families savings and mortgagedThat the house in pursuit of his dream of being a day trader.
And believe it or not, these stories are true. I wish they weren’t, but I see it on a fairly regular basis. Yet, I don’t understand it.
Many traders purchase a book or two on day trading and establish a demo account and trade for a few weeks and decide they’re ready to trade a live account. The results of this type of trading preparation are fairly predictable. These traders never had a chance because they were poorly prepared to trade and hadn’t spent the time and effort to understand how markets function and how trades are set up.
You would think common sense would be a great asset in trading, but nothing could be farther from the truth. Common sense will serve you very poorly in trading futures contracts. For reasons not fully understood, market sense is far different than common sense. I can’t tell you how many times I’ve seen government issued a report that ought to send the market skyrocketing. Yet, the market reacts very poorly to this good news and ends up tanking. The point is a simple one; there are many variables that go into stock market and futures contract pricing, and to focus on one piece of news is to miss the point.
Even more disappointing is the fact that had this trader taken the time to learn how to trade in a proper fashion he or she would probably still be trading profitably. I have a very good friend who is a very intelligent fellow. He has an MBA from an Ivy League school in business management. Like many people, he decided that he was sick of the corporate rat race and decided to become a full-time futures trader. But his education betrayed him. He’d been trained to look at past trends and historical data and make decisions based upon this information. Unfortunately, the market doesn’t look backwards; it looks forward. And that’s the hardest thing to teach people, that the market is constantly trying to price equities six months to a year in the future.
To make things worse, it’s not unusual for traders to become desperate as they begin to deeply their trading accounts and abandon the limited trading technique they learn; and problems compound and beget more problems until they no longer have a problem, they’re broke and out of the business.
It’s not necessary, and proper training will keep you in the market as long as you maintain proper trading technique and exceptional self-discipline. But the question is this:
Why do rational traders sometimes act irrationally?
One of the toughest facts to accept as a trader is that you are going to lose on some of your trades. Probability makes it infinitely clear that there is no trader who can trade with 100% accuracy. Quite simply, you’re going to lose a certain percent of trades and there is nothing you can do about it. No trading system can assure you of 100% accuracy, I don’t even know of a trading system that consistently trades with 70% accuracy. Now let me qualify that, you will see ads in the trade journals that trumpet the fact that they are trading at an 80% profit rate. Don’t believe it.If a trader that assist them performing at 80% efficiency he most certainly would not be advertising it for sale.
The point is a simple one, and has been my focus for the last couple weeks. I want to trained novice traders in a system that will help them succeed in the early parts of their trading career. I have worked diligently to set up a system that will accomplish just this goal. I will be posting links to the system in the coming weeks and I encourage you to take advantage of the system, as there is no better lifestyle than trading for a living, especially when you are trading profitably.
