Why New Traders Fail

I came across an excellent article by Brett Steenbarger, Ph.D. Here is an extract with some of my comments:

We're hearing about record numbers of new traders opening accounts at brokerage firms lately in the U.S. and in Asia.  Why?  Commissions have dropped to near zero and trading from home suddenly looks appealing during a period of social distancing and increased unemployment.

But the risk is that these new traders will start out by trading, not by learning markets.  Enticed by self-appointed gurus, teachers, and coaches who offer little more than stale chart patterns and technical indicator readings as "edges", this new generation of traders is likely to take risks with their capital well before they have truly understood and mastered the markets and strategies they trade.

Frustrated with their failures, many will turn to trading psychology for answers.  But the answer is not just in psychology.  The answer is that you have to learn the game before you can master the game.  No one starts out as a musician by trying out for concerts at Carnegie Hall, and no one takes up a sport and expects to be in the Olympics any time soon.  When we're trading, we're trading against career professionals and finely honed algorithmic systems.  When you place a trade, you're stepping into the big leagues.

So here's my advice to new traders:  If you get a sales pitch promising big trading success without a rigorous learning curve, know that you're being mislead.  Those making the pitch are selling hope, not trading expertise.  The biggest mistake you can make as a new trader is to take short cuts in your learning process.  How many years of playing golf does it take before someone makes the PGA tour?  How many years of piano lessons precede a solo with a recognized orchestra?  How many chess games are played and reviewed before someone reaches master and grandmaster status and wins tournaments?  

I recently mentioned that I will be posting how-to videos and content on proven psychological methods for peak performance.  On a new website, I will also be laying out a curricular process that will help traders to learn markets from the ground up, drawing upon the actual learning curves of successful traders.  No fees, no sales pitches, no promotions.  If we can all do a little giving back during this time of health crisis, we will all be richer for our efforts.  In sharing, we receive. 


I think this is an excellent advice. The Internet is full of investment gurus who promise To turn $12k to $4M or $250 into $16,000 in Just One Month without any effort. Those who take the bait find out very quickly that the reality is very different.

The old proverb is: give a man a fish and he eats for a day, teach him how to fish and he eats for a lifetimes. Our trade alerts are the fish which are thrown around but the real value is in learning how to fish. This requires commitment and participation.

As one of our veteran members wrote:

Learning the new strategies was hard, I had never traded this way before. But, I also had to change my way of THINKING as a trader. Knowing the mistakes I had made in the past, I knew if I could get by those and develop a more rules based approach, and follow those rules, I could make this work.

It's been a long journey, but I could not be happier. I only trade using the SO methods. My trading is much more stable, I'm a calmer trader, I don't get too excited about the winners, but I also don't get too letdown by the losers. 

90% of retail traders lose money in the stock market. You know why? Because they give up too quickly. Success in trading requires long term commitment, determination and discipline. Unfortunately, many people concentrate on short term performance instead of investing in their education and build long term goals. New traders expect to make money with a new strategy after few months which is usually not realistic.

If you are ready to start your journey AND ready to make a long term commitment to be a student of the markets, Start Your Free Trial

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