Are you feeling like trading is just not for you? Have you been trading for a while and simply can’t stay consistent?
Most new (and experienced) traders go through this frustration and self doubt. Many of us go through this on a relatively regular basis. You’re not alone. If you’re feeling helpless read the tips below and perhaps we can help you get back on track and moving closer to making some profitable progress as a trader.
Reason #1 – You Lack Discipline
Probably the most common reason people fail at trading is that they lack the proper discipline to successfully trade. Trading can be exciting and fulfilling, but it can also be terribly frustrating and demoralizing. If you don’t have the right mindset and rock solid discipline you’ll be sure to fail. Discipline in trading can take on many forms. I’ll outline 2 below.
First, in order to be successful as a trader you need a disciplined money management strategy. Although the basic money management strategies are common among successful traders you’ll need to develop a system that works for you. For example, some traders will set a maximum percentage risk on any trade, some may limit their share size and some adhere to strict stop loss principles. Whatever your money management strategy is make sure it’s sound and you follow it 100% of the time. It only takes one bad trade to blow up your account. Proper money management will mitigate this risk.
Second, you need the discipline to stick to your trading plan each and every day regardless of your performance. On up days it will feel too easy and on down days you’ll want to quit. You need to have the discipline to stick through the tough days knowing that these are part of the game. The best traders in the world have the discipline to ride out long bad streaks knowing that they can get back on track in the weeks and months ahead.
Reason #2 – You Don’t Have the Right Tools
The internet has brought us amazing tools at a fraction of the price available to traders in the past. Although we have better and more affordable tools (often free) this advantage is available to all traders also. Make sure you take advantage of all the free and inexpensive tools you can, because everyone else certainly is.
Depending on your style of trading certain tools will be more valuable than others. For example, swing traders may find very technical intraday charting and screeners less useful than intraday traders. Whether you’re a fast scalping day trader or longer term swing trader make sure to do some research on some of the great tools out there available to all of us. Some of my favorite trading tools are:
Finviz – I’ve used this site for many years and I absolutely love their tools. You can use most tools for free and upgrade if needed for more real time quotes and backtesting. I’m still surprised at the amount of free screeners they offer. If you haven’t checked them out yet make sure to visit soon.
StockCharts.com – One of the older charting websites on the net, StockCharts.com offers get free (and premium) tools in addition to a wide variety of pre-defined stock screeners. Personally I don’t use their charts (I use Interactive Broker charts) but I love to find great stock ideas with their free pre-defined stock screener.
InteractiveBrokers.com – IB is an actual online discount brokerage, but I have to mention it here because for most traders their platform and competitive fee structure can be invaluable. IB has the lower stock, futures and options trading rates on the street and you can trade absolutely any type of financial security imaginable. Some would argue that their platform is not as “pretty” as some in the industry, but if you can get over the rudimentary platform styling IB can be a great resource.
Reason #3 – You’re Trading the Wrong Markets
Choosing the right markets to trade will depend heavily on your personality, experience and preferences. For example, some people enjoy the relative simplicity of the equity markets and some people prefer the complexity of the options and futures market. You’ll need to pick a market that you enjoy following and one that you can understand. Below are some of your choices:
- U.S. Equity Markets
- Options Market
- Futures Market
Some markets are simply not for everyone and although many markets offer extreme advantages over others they still may not be for you. For example, I trade U.S. Equities and equity options because I understand the underlining security. I’ve also spent countless years understanding the complexity of options and spread trading. Forex on the other hand however, although it offers some great advantages such as immense liquidity and higher leverage, is difficult to trade if you can’t keep up with each respective countries’ news as well as the global market environment. That being said, perhaps you’re a news junkie and something like Forex trading seems appealing. In that case get in there and attack the market!
Reason #4 – You’re Not Putting in the Hours
If you think you can become a successful trader by putting in a few hours a week you’ll be terribly disappointed in your results. Even seasoned veterans of the markets find it challenging to maintain their edge even after investing tens of thousands of hours to the craft. If you truly want to give this a shot you’ll need to put in the hours of work and focus required to truly make it in this competitive industry.
Reason #5 – You’re Doing it for the Money
Don’t get me wrong, just like most people I love money too. However if you’ve started trading to make lots of money I guarantee you there’s a easier ways of making money than trading. After watching movies like Wall Street, the Wolf of Wall Street and Boiler Room you may be tempted to take on the trading challenge in hope of riches. I suggest you resist the urge and try something different if you’re looking for quick cash. Although it’s very possible to make lots of cash trading, if making money is your motivation this goal may actually work in against you.
Instead of focusing on a monetary goal you’ll want to set your objective to trading consistancy. Your goal should be to learn to trade and become profitable on a consistent basis. Once this is achieved you’ll be able to scale up your trading, increase your share size and make some serious money. But until then, trade small, keep disciplined and focus on your trading rules.
You may feel currently like you’re not cut out as a trader. Take solace in knowing that most successful professional traders have felt the same way at one point in their journey. Take heed to the tips laid out above and before you know it you’ll be moving closer to become a profitable and consistent trader.