Trading is hard work. That is the principal reason, in my humble opinion, why so few people who try it are successful. Get rich quick and/or easy schemes are everywhere in the world of trading securities.

So what is a trader supposed to do?

First and foremost – get real! There is no such thing as free money (other than the dole from the government – and it’s not really free – someone else simply is paying the bill). Trading securities puts you up against people who make their living at it. You are going to have to take money from those that make their living taking money from other people. Trading is a zero sum game – for every dollar of profit you make someone else has to lose a dollar. If you think that is going to be easy, I have a nice piece of Florida swampland that is ripe for development.

Let’s get serious. If trading is so damned hard to do successfully, why even try. That is a complicated question and there are probably a great many different answers. But mine is probably close to the average answer: I want to compete against the best and win.

That may seem trite and shallow, but it is a simple truth. Whatever you endeavor to do, if you take that attitude – then combine it with the willingness to work hard – success is possible. It is never guaranteed – but it is possible.

The thing that makes trading especially hard is that it requires no only determination and the willingness to work hard – it requires money – trading capital. You run out of trading capital and you are out of business. Determination and willingness to work hard are not going to cut it without money to trade. So preservation of trading capital is a fundamental necessity for successful trading.

The greatest danger of running out of capital with which to trade occurs in the early stages – the learning stages. The best advice I can offer is to learn to trade by doing paper trading – you learn the trading process without risking real money.

Over the years I have worked with many traders – neophytes and pros. Both use paper trading – the neophytes when learning and perfecting their basic trading methods – the pros when implementing new techniques.

Over many years of observing paper trading, I have concluded that there is a fatal flaw in the implementation – not the process itself – caused by laziness in the traders practice. Paper trading, to be useful has to be done in a manner that emulates to the greatest extent possible the actual trading process.

I have seen traders ignore the spread, thereby enriching their paper trades. I have seen traders take the very top or bottom of the move they are trading as their exit. And there are other little ways of enhancing the trade. But you are only fooling yourself. In the real world it is difficult to capture more than 80% of any given move in price – and that 80% must include your spread and any commissions associated with both entry and exit.

Bottom line – do not be lazy – when learning – or when trading.

Get a good system – learn to use it – and work hard.

Not bad advice for anything you choose to do in life – but absolutely essential if you expect to trade successfully.

 

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