90% Of You Are Doomed To Fail

If you could start you own business with $100,000 that would potentially give you exponential revenue return without having to necessarily work harder or longer hours wouldn’t that be great? Of course, a business opportunity like this would require you to learn the ropes about the industry and how to run a business. And unless you already have direct experience in the industry you’ll need to roll-up your sleeves and put quite a bit of work in at least in the early months to make sure you don’t make too many costly mistakes that might ruin the business. But you will be your own boss and have tremendous earnings potential providing for a very comfortable life if you can grow the business. I think a lot of people would jump at this opportunity if they had the money to try. Wouldn’t you?

What if I told you that in the United States the failure rate of those starting their own small business (any form – home-based, brick & mortar, online, etc.) is an alarming 90% within the first-year of starting? Yes, this is the same statistic cited for those who begin trading for the first time as well. Meaning, that the high failure rate of new traders has nothing to do with the financial markets or trading as an activity itself. It has everything to do with the kind of planning, execution and careful focused effort people put into running their own small business.

My guess is if you put up $100,000 to start your own business in the above example you’d be sure you put in every waking moment to learn-the-ropes and work incredibly hard to avoid making costly mistakes by putting in serious time to make sure you had the proper foundation for making the business a success. The problem is that most people who begin trading for the first time do not look at trading as a business and treat it as something more like a hobby or see it as “easy money”. You are trading against some of the best minds on the planet…the best that money can buy at all the top banks, brokerages and hedge funds. Would you step into the ring with a professional boxer and fight him after having read a few books on boxing and hitting a heavy bag for a few months? Most would laugh and say, “of course not…” unless they had some serious death wish. But surprisingly, this is what people do everyday when entering the trading arena.

The good news is that you can learn how to trade well since it is a skill-based endeavor. Plus, there is a low barrier to entry so that you can learn how to master and hone your craft before committing large amounts of capital when you feel you’re ready. Here are a few of the major steps you need to take in order to increase your odds of surviving and doing well at trading:

• Read as many books, publications, websites, etc. that you can get your hands on (this will give you familiarity and basic foundation)
• Find a mentor – either face-to-face or via online avenues – this list is always changing (feel free to email me via my Contact page if you’d like my opinion on any particular service)
• Write down your trading plan / trading setups that you will look for in order to make a trade
• Regardless of what you learn in the previous two bullet-points, make sure you actually learn how to read price action either via Level II screen and/or the charts (you should be able to trade on price alone if necessary)
• Trade as small as possible when first starting out (this will vary depending on the market/instrument you’re trading)
• Avoid relying on “paper trading” as a means for education…risking real money (even if very small) is the best educator
• Keep a trading journal to record every trade you make, why you made it and the underlying market conditions that existed when you opened and closed the trade
• Do less of what doesn’t work according to your journal; do more of what works according to your journal
• Do not trade bigger size until you’ve been able to successfully carry out your trading plan / trading setups and be profitable after 30 attempts (the minimum statistical sampling required to have some level of credence)

This list isn’t exhaustive but many people I’ve known who failed at trading missed (or were unwilling) to do some or many of these items. If you can’t do the minimum required in this list then I’d highly recommend against you trading…it’s not worth you risking your hard earned money if you’re not going to put in the time and focus.