Why Most People Fail as Traders

by Darrin Donnelly on April 3, 2012

Why do people who are hugely successful in one career end up failing miserably as traders?

My trading hero, Nicolas Darvas, succeeded in several other fields besides trading, but his case is an extremely rare exception.  The much more likely scenario is for someone to confidently enter the trading world after finding success in other areas, only to whittle away at the fortune they made.

Why is that?  After all, there are universal principles that make one successful and we therefore tend to assume that success in one area will more than likely translate to success in another area.  But in trading, this logical assumption fails much more often than it proves right.

I think the reason for this is due to a fundamental difference in what it takes to succeed in trading compared to other professions.

To be a successful in almost any field, you have to be extremely productive.

Whether you’re a writer, athlete, teacher, salesman, doctor, entrepreneur, CEO, just about any career you can think of, the level of your success is dependent on how productive you are; how much value you add to the finished product.  Your goal is simply to produce more of something or a better version of something.

However, for a trader, there is no product to produce.  Our finished “product” is the amount of money in our account at the end of the day and we make that money by making smarter decisions, period.

The inability to truly comprehend this simple fact (and its implications) is why so many people fail at trading.

People enter the trading world eager to multiply the money they’ve earned from their other career.  However, the crucial skill (productivity) that helped them earn all that money outside of trading doesn’t translate to success as a trader.

The reasons are obvious.  You can’t force a winning trade the way you can force yourself to finish a task.  You can’t create more winning trades the way you create more widgets for your company.  You can’t fix or improve a trade the way you fix or improve the product or person you were hired to fix.

New traders rarely adapt well to this fundamental difference.  The most common response to a dwindling trading account is to change the trading system.

It’s easy to see why this is such a common response.  In other careers, where all success hinges on production, if something isn’t working, we continuously make changes until the final product is working the way we want it to.

But in trading, constantly tweaking our strategies is a recipe for disaster because we’re not building a final product.  Put another way, we can’t force the market to behave exactly the way we want it to.

Successful trading is about reading and reacting, not changing and creating.  It’s about coming to terms with the fact that we have very little control – actually, none whatsoever – over what opportunities the market will give us on any given day.

And that brings us to perhaps the biggest problem of them all: most people CAN’T STAND the idea of not being able to control something.

In our technology-obsessed world, we hate the idea of not having control so much that we often delude ourselves into thinking that we do have control over things we don’t.  (Come to think of it, that may be why The Secret, a book that promised to reveal how you can control every single aspect of your life with the power of your thoughts, recently sold more than 20 million copies.)

The sooner you accept the fact that you can’t control the market and change it to your will, the sooner you will be on the path to successful trading.

Ultimately, successful trading is all about substituting one fundamental key to success – that is, productivity – for a different one: DISCIPLINE.


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