LONG ANSWER
The simple fact of the matter is - that for most wannabe traders – trading profitably and consistently over the long term is probably the hardest thing any of them will ever try to do. Make no mistake; traders who achieve this feat in less than six months without breaking into a sweat are as rare as rocking horse poo! Effectively, this would mean being profitable from day one, as a trader needs a 6 month track record as an absolute bare minimum to make any claim to consistent profitability.
The reason it’s so tough is pretty obvious: if it was easy, everyone would do it! Not many do - and many that try - fail. To make money consistently, you’ll have to be as good as, if not better than, the professional traders working for the big city institutions. Why? Because they already have an ‘edge’ over you. (The term ‘edge’ is explained in the
Essentials of First Steps Sticky.) They have state of the art kit, pockets that are much deeper than yours, access to the best and latest information and are surrounded by colleagues with specialist skills and years of experience. Likely as not, these are the people on the other side of your trades. What makes you think that you can compete with them? Look at it this way: if you truly believed you could dispatch Andy Murray in straight sets at Wimbledon or do a lap around Silverstone faster than Lewis Hamilton, then you’d probably become a professional tennis player or F1 racing driver. Beating the top proprietary traders of Canary Wharf and Wall Street is going to be equally tough. The good news is that it can be done, but don’t kid yourself for one minute that it’s going to be easy. Between you and long term, consistent trading success, lies a lot of hard work.
Why is trading so tough?
This begs an obvious question: what makes it so hard? Listed below are some typical issues that tend to hamper the progress of many new traders:
1. Three dirty 4 letter words
Trading requires total commitment and
hard work; all of which requires a lot of
time. Often, because of job and family commitments, newbies look for short cuts to success. Don’t waste your time – there aren’t any! The really bitter pill to swallow is that time and effort spent trading is time away from your family and friends. Relationships can – and do – suffer, so you’ll need to consider how these will be affected before you start. Be sure to fit your trading around your loved ones – not the other way around. They are way more important than trading and any money you make from doing it – even
if you’re successful!
2. Emotional highs and lows
As human beings, we’re very susceptible to our emotions. The markets thrive on fear and greed and, everyday, traders make decisions based on their feelings. Often, they are decisions they later regret. Traders who are unable to separate their emotions from their trading have two options: either to give up or to switch to mechanical systems trading. (For more details on this, please refer to the FAQ:
What’s the Difference Between a Discretionary Trading Strategy & a Mechanical Trading System?)
3. Discipline
Trading requires very strict discipline and the ability to follow a well researched trading plan. Creating such a plan is one thing, sticking to it in the ‘heat of battle’ is another matter entirely. Suffice it to say, it’s often far from easy!
4. Head stuff
The little voice in each trader’s head can reap havoc. This can be virtually dormant when paper trading a simulated account but, when real money is on the line, it’s a very different story. It’s a commonly held view that the traders who fail do so not because of a lack of knowledge, ability or experience, but because their mental wiring just isn’t suited to the task of trading. That’s why so much attention is paid to psychology and why T2W has an entire forum dedicated to the subject; ditto with the
Articles section of the site.
5. Thinking can be costly
Many of the skills required to succeed as a trader are counter-intuitive. For example, there is an oft’ quoted axiom along the lines of ‘trade what you see and not what you think’. Many traders will sell the market because they think it can’t possibly go any higher after an extended rally. Buying the market in these circumstances is tough because the little internal voice in your head is screaming: “it’s overbought already; it can’t go any higher. The minute you buy it, it will reverse and drop like a lead balloon. You don’t wanna buy it, you wanna sell it – that’s what you wanna do!” So, you go ahead and sell the market and, surprise surprise, it just keeps on going up . . . and up . . . and up! Making rational, evidenced based trading decisions – as opposed to emotional ones backed by the flawed logic hinted at above – is a skill that many traders find hard to master.
6. Reality Vs hype
A common misconception about trading in general, and day trading in particular, is that it’s nonstop adrenaline pumping action. Maybe it is for a few, but the reality for many traders is that it’s pretty boring much of the time. Waiting for the right set up to appear and striking at just the right time often requires the patience of a saint. Literally, you can wait for hours, make an overdue call of nature and return to your trading desk to discover you’ve missed the one and only decent opportunity of the day! This leads to frustration which, in turn, leads to trading emotively. And, almost without exception, that leads to regret.
7. Patience
Hot on the heels of boredom trades and failing to stick to your plan is the ability not to trade. Yes, you read that correctly: the ability
not to trade! This is hard for many traders, especially when they spot what looks like a ‘no brainer’ opportunity, but one that isn’t part of their trading plan. They take the trade and, often as not, it’s a loser. Sitting on one’s hands and not trading is a tough gig for many. If you trade from home and you have a partner, sooner or later, you’ll have a conversation in which you try to explain to him or her that doing nothing is not only a part of your job, it’s an essential skill for all (day) traders to master. They will look at you as if you’ve completely lost your marbles. Guaranteed! This is another example of why trading is counter-intuitive and goes against the grain for many.
The list above is by no means comprehensive. Rather, it is a taster of just some of the issues that traders face on a daily basis in their quest to become consistently profitable in the long term. This all sounds somewhat negative and some readers may be left thinking that it’s not only difficult to become a successful trader – it’s next to impossible! However, it’s better for FAQs like this one to prepare you for the worst than it is to gloss over the difficulties and say ‘go for it – it’s a piece of cake -you’ll be fine’. Maybe you’ll be one of the few who achieves your objectives faster and with less effort than you were expecting. This is far preferable than building false hopes which, in time, are dashed. Be in no doubt, there are success stories on the T2W forums of members who make a great living solely through their trading activities. So, it definitely can be done. Not only that, a few of them will even tell you that it’s really not that hard!
The route and time taken by each trader to go from a standing start to consistent profitability varies from one trader to the next. There are few averages, no benchmarks and no definitive set of hurdles that all traders have to jump through. The challenges faced by one trader will seem inconsequential to the next – and vice versa. It’s for these reasons that answers to questions like this FAQ are generalisations at best. However, it’s a virtual certainty that there will be some obstacles along the way and some of them may appear insurmountable. The good news is that appearances can be deceptive and there are nearly always ways around them. In this regard, persistence is a useful attribute. It won’t guarantee success, but it will certainly come in handy.
There are many popular little axioms that traders use to sum up one aspect of trading or another. The one that neatly sums up all the above and the headline question of this FAQ is this: ‘trading is simple, but it isn’t easy’.
