The statistic that 95% of traders fail is often well documented on the internet. At a first glance it does seem a remarkably high statistic but it’s also one that’s difficult to define.
If you’re a retail trader that’s just starting out then you may be sat at home using a spare room or office to trade from, how do you know that 95% of people who do the same as you eventually fail? What does failure look like?
Clearly if someone deposits money with broker, trades it all down to zero then closes the account never to trade again then you can safely say they have failed. What is more common for would be profitable traders it to spend a number of years in a cycle of losing and refunding their account, or perhaps floating around breakeven. Could you say these traders have failed? It depends on their initial objective but we can assume no one enters into this business to achieve that and no more.
It’s also fair to say that just because someone has spent multiple years in a losing and/or breakeven cycle it doesn’t mean they are failing, we all know there is all learning curve to this game and that can take a long time to flatten out. Those years could simply be defined as your education!
Nonetheless, as an individual, it’s important to define what we want from trading and to recognise when we are not getting it. There will come a time in every aspiring traders career where they will have to look in the mirror and decide if they truly want this, after all you will be spending a large portion of your time dedicated to the markets.
It’s that dedication and multiple hours a week spent in front of the markets that people sometimes underestimate, coupled to that if you’re not getting the results you desire then it can start to have quite a detrimental impact on your life. It’s not spoken about often but it’s quite possible that you will experience the negative sides of trading, this may impact your physical health, mental health and relationships with your family and friends.
You need to define what your cut off point is, where do you draw the line and say enough is enough? You may need to accept at this point that trading is not for you, especially if its seriously impacting your personal life. If you get into this position then we recommend taking a complete break from trading, this break may need to last months rather than weeks and during this time you can address the things that have affected you. Pay more attention to your health and relationships and get yourself back into a stronger place. When you feel ready you can start to think about returning to the markets, however it has to be done in a carefully considered way.
Give plenty of thought to what prevented you from succeeding the first time around, what were the triggers that put you into a negative place to begin with? This part of the process requires complete honesty otherwise it won’t work. It’s often said that simple is better so it may be that you need to go back to absolute basics and trade with a strategy that requires less chart time, the daily time frame for example, make your strategy easy to follow so it’s less ambiguous to find examples of ‘good’.
Once you’ve built up the basics you can start to look at trade management, risk management and creating a disciplined mindset to be able to stick to the rules you have created. All the time you need to mindful of slipping back into negative ways.
Trading is often a delicate balance but you need to define your cut off points, recognise when you need to re-set and address other aspects of your life. You never know, it might just be what you need to take your trading to the next level!