The Top Seven Reasons Why 90% of Daytraders Fail
First off, I have no idea whether or not the "90% of daytraders don't make it" is even true or valid - however, most people that I talk to assume it to be true, so let's go with it.
90% of restaurant owners don't make it. 90% of club owners don't make it. And 90% of daytraders don't make it.
I am sure that in all three cases there are certain characteristics that all of the failures shared. This is certainly the case when it comes to daytrading. In almost every case of a "daytrading" failure, there are certain commonalities that all of the failed traders share. Here are the most common reasons why 90% of daytraders will end up failing:
1. Under-capitalized. The number one reason for failure. You can't expect to quit your job with nothing saved except $15,000 in trading capital and expect to make it. It's practically impossible. Don't quit your job until you have pretty resources saved up (try $50,000 in trading capital and six months worth of living expenses).
2. They don't treat it like a real job. Trading, and especially daytrading, is hard work. For some reason, people seem to think that trading is "easy", and invariably people become lazy. I will tell you this - all of the successful traders that I know work their asses off. They put in more hours than a full-time job. They are putting in 10-12 hour days during the week and are back at it Sunday night. Don't get into trading if you aren't prepared to treat it seriously.
3. They don't develop their own systems. If you are going to try to trade for a living, then you need to develop your own systems that you are comfortable trading with. Systems that have a proven track record. If you are blindly following someone else's calls, then you are bound to eventually run into trouble. What happens if you quit your job and that ultra-hot daytrading chat room suddenly turns cold or shuts down?
4. They don't have a set schedule. This relates to #2. Just because you are working at home, doesn't mean that you can exist without a proper set schedule. You can't wake up two hours into the trading day and expect to be successful. You can't book off two hours early to go golfing - what happens if you miss a big opportunity? Plan to be at your desk one hour before the market opens and one hour after it closes, and glue yourself to the chair for the rest of the time. It's a full-time job, and requires a full-time obligation.
5. Lack of proper tools. If you are going to be a successful trader, then you need the proper tools. Proper computer setup, proper quotes setup, proper charts setup. This is a business, and you need to invest in yourself in order to be successful.
6. Lack of support from your family. We talked about this yesterday. Make sure that if you have a family, they are completely on board with your decision. If your spouse doubts that you can make it, then you will have an even harder time making it in the long-run. Confidence is important. If your spouse doesn't have your back, then you need to really think twice as they will make your life miserable.
7. Lack of non-trading capital resources. You can't trade without a safety net. You need to be able to trade without thinking about how you are going to pay your rent this month. You need at least six months worth of expenses set aside. You can't be sweating out how you are going to make your next bill payment because it will completely affect your confidence and negatively impact your returns.
Filed under: Motivational | Stock Market Education | General Knowledge