The Answer Is, Ask Another Question

by jennifer on April 12, 2012

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Why do people lose money trading? There are only two ways the trade can go, for you or against you. All of the trading systems and fundamentals in the world amount to hundreds of thousands of dollars in training and education, and when it comes right down to it, it’s a 50/50 chance that your trade could win or lose.

I’ve heard it said that for all the people who set out to be retail traders, trading from their home computers, smart phones, and iPads, there is only a 3% rate of success. When the odds are 50%, why is the payout only 3%? Honestly, I could have become a professional poker player and had a better statistic for the past 11 years I have been on this venture.

Two thoughts come to mind – what is success, and how do we mess up the odds?

I want to share with you, because we’re all in this together. Traders are the most interesting group of people I have ever met, and I’m proud to spend my time in circles of people who are generally characterized by traits such as:

Honesty – The markets flush out phonies pretty quick. If you can’t honestly repeat your trade setup, you won’t be able to stack up a profit in your account over time.
Desire to be self-sufficient – Most traders would rather make a million dollars trading than buy a million dollar lottery ticket. There is a lot of satisfaction in creating our own wealth.
Hard working, long suffering, and patient – How many hours can you stare at a line on a chart? How many times did you go back to your phone or your computer to look at it again today? And do you get up in the middle of the night to pee, or do you get up to look at a line on a chart? (You know who you are!)
Smarts and hearts – In high school I had an English teacher (who was also my tennis coach) tell me that the average person only uses 2% of their brain, and if we gave it just a little more effort we could produce more amazing works in less time. We believed her, and we all produced essays, dialogues, poetry, and short stories for her to read. She told me later, with a chuckle, she was just trying to get some more interesting essays to read, and it worked. On the court she said we could either bend our knees and have faster feet, or we could just “decide” we were going to win. She was big lady who didn’t “look” like she should be a great tennis player, but no one on the high school team (boys or girls) could beat her. Was she on to some untapped brain power?  I was prime for her manipulation and spent the rest of my life believing that I was capable of accomplishing great things. I recently tried to validate that statistic and could not, but I still believe there is some truth to the notion we have untapped potential. Some take a spiritual approach to this idea, and some more scientific, (like this cool blog I just stumbled upon, http://www.scientificamerican.com/article.cfm?id=do-we-really-use-only-10). Inspiration makes things happen. Is it heart or is it mind? I do not know, but it’s available to you and me.

I’ve also heard that most people only use 2% of their computer’s functionality. If that’s true, imagine what we could do with untapped potential in our brains and our computers, two things we use all day long as traders! That inspires me to think some new thoughts right now, and do something cool on my new  17 inch HP Envy! (I just justified killing an hour on my new toy!)

My favorite “smart people” are average people. I have been in trading circles with, (and I’m not kidding), brain surgeons, rocket scientists, mathematicians, and “moms” who never earned a college degree. How cool to be part of something so remarkable where all the brains have the same opportunity and ablity to figure out a trade and make some money.

Before I get totally off track, let me come back around and tell you about the question that I think can ruin your odds of being a successful trader. The answer is “I’m not going to tell you because it will damage your trading mind.” What is the question?

Everyone wants to know how much money someone else is making trading. Having lived through quite a few trading experiences both good and bad, both huge and tiny, both regimented and free-style… My experience tells me that the more important question is what is your trading plan and can you stick to it? Know what you’re setting out to do when you answer that question and you will be able to accomplish your trading goals. At the end of the day your brains are bigger, your bucks are bigger, and your sense of satisfaction is full. That’s my idea of success. If I set out to make 30 pips, and I take profit at 30 pips, I followed my plan and I don’t feel bad that it went to 50. One time I set out to make 500 pips, I made 794 pips, and felt like a loser because I didn’t hold it when it ran over 900 pips. That’s how you mess up your odds! Why? Because the next time you try to make that happen, you end up losing 500 pips. That’s the truth.

If you ask me what my biggest trade was the answer is 794 pips.
It was worth about $800. I cannot repeat it. It has no meaning to me.

My smallest trade ever was 3 pips.
It was worth about $1000. I could and did repeat it over and over, and it nearly ruined my life.

My greatest trade ever is worth 30 pips.
It’s worth about 1.71% of my account. I can and do repeat it many times every month. I can project my account growth and I will close this trading account and set it aside for retirement when I turn 50. (6 years). I don’t wish it was better. It’s perfect for me, and every day I know exactly what to do.

What’s your trading plan? Are you finding success? If not, try writing out exactly what you’re trying to accomplish, and see what happens when you just go with what comes naturally for you. Last night I watched a movie called Gifted Hands, based on a true story about a neurosurgeon named Ben Carson. It’s a story about unwarranted and unexpected success in the academic life of a man who was inspired by his impoverished and illiterate mother.  She had no physical reason to believe, but believe she did that  great things were possible and came from inexplicable places.

I hope you’re having a great year, and that all your trading plans are keeping you on track. Be calm. Be great. Have a wonderful day!

 

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  • http://twitter.com/tradeforincome Israel Garcia

    I really enjoyed it , thanks Jennifer

  • http://twitter.com/tradeforincome Israel Garcia

    I really enjoyed it , thanks Jennifer

  • Rob Wilson

    Jen this is so so true. Nice one.

  • spiro

    Hi Jennifer .

    Interesting questions you ask,, In the past, I have philosophized why so many do not succeed in trading ..

    I thinking over that group of traders who have worked hard with its trading over many years and failed to get through the famous eye of the needle ..
     
    In many ways I think the final hurdle is that human living in a (society in a network of lies and deception)
      

     Google this sentence and you will find many interesting scientific articles how
    Lies and deception affecting you
    In all contexts, work, leisure, friends, relationship, and in trading :-) )
     
      

        

    So what has, lies and deception in trading to do ..

    Personally, I think there must be certain conditions present to succeed in trading.

    Take example, a trader trainee who is employed by a trading company.
    First is that he is surrounded in an environment of other successful traders.

    But the most important factor is perhaps that there is no lie just a horrible truth that he is confronted with every single day ..

    Every day ,trading debrief compare results and ideas with other traders day in day out.

    You can not hide anything , you will be trained in a complete transparency environment.
    I think that is most important factor for success ..

    There is no profession where your skills can be measured as accurately as in trading ..

    Personally, I had two mentors one profesional trader and one (hobby professional trader.)

    The Hobby trader who has had the most important impact on my trading .

    The most important question was not that I asked my mentor But the questions I was asking myself.

    What limit my mentor why he has failed how can I overcome the limits that my mentor has ..?

    This is dead honest questions but NECESSARY if you want to have progress as a trader.

    What limits me, what deception i have .
    what can be done differently.?

    Sorry my clumsy wording. I hope someone can benefit from my thoughts.

  • Anonymous

    Thank you for your comments. I appreciate the conversation.

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