Why Most People Fail at Trading!
By Christopher Tubby
Most individuals that consider trading as a
profession are unprepared for the hard work
and dedication it takes to become a trader.
The second issue is not having enough capital
behind them. Ideally, they already have a
steady income and therefore can take the
slow approach towards becoming a trader.
This is important as it removes the need to
make money daily. Trading is about
probabilities and traders should only be
considering the high probability trades, its
quality over quantity!
Before you enter the world of trading you
must consider the maximum amount you will
invest in yourself to become a trader. Once set
this should not be broken for any reason! It’s
very easy for many to open a small account
and then keep topping it up if they lose,
however, this can lead to a massive erosion of
their hard-earned capital without realising it!
With a fixed amount you will track it much
tighter and control it better.
Having to make money to cover bills means
traders rush into trades, grab at profits, set
their targets too high – which in turn leads to
taking on riskier trades and disappointment
when they do not reach their target.
Many begin trading without enough practise
behind them to create a solid trading plan. A
set of rules built to protect them from losing
too much capital in any one trade on any one
day! It also includes the criteria the market
must meet before a trade is executed.
Creating a solid trading plan helps develop
consistency which is essential to a trader. It’s
important to understand not just the market
and the product you will trade but also its
important to understand yourself!
As a professional trader when I am
considering taking a trade on the first this I do
once I have identified my entry price is to
establish where my stop loss should be placed
as this provides the potential loss should the
market go against me. Once I have
established that I can look at the potential
profit I can make from the trade – establishes
the risk/reward in the trade. Another thing to
consider is something I call the three Vs –
Volume versus Volatility. The higher the
volatility the less volume (size) to commit to
the trade as this allows for the market to go
further against you without increasing the
potential loss. Most trades will go against you
before moving back in your favour…if they are
going to!