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Yes, Give it to me

The 7 Biggest Reasons Why Traders Fail 

Last Updated: April 6, 2020

By Rayner

My YouTube channel was created in 2013.

The first blog post on TradingwithRayner went live in 2014.

And along the way, I’ve interacted with thousands of traders and the truth is…

Majority of traders fail.

Here’s why…

You want to be spoon-fed without doing the work

“Hey Rayner, which is the best moving average to trade with?”

“Can I use 2 ATR to set my stop loss?”

“Which indicator is best for Trend Following?”

Now, those are the type of questions I get each day.

But what’s wrong with these questions?

It shows signs of laziness, that you’re not willing to do the work — and you want to be spoon-fed.

And here’s the thing:

Even if I tell you a method, strategy, or indicator is the best, you won’t have the conviction to trade it, for long.

Why?

Because when the drawdown comes, you’ll abandon it and claim it doesn’t work. Then you’ll look for the next best thing and the cycle rinse repeat itself.

Do you see the recurring pattern?

You don’t validate your findings

You’re probably wondering:

“What does validate means?”

When you validate a strategy, it means you’ve tested it and know that it makes money in the long-run. (This can be done via backtesting, forward testing, etc.)

And here’s the thing:

Most traders are not willing to validate their findings. You don’t want to do the work. You’re not willing to spend the time to figure out whether something works, or not.

Instead, you want to “copy” the strategy of other traders and hope things turn out fine.

Unfortunately, that’s not how it works.

Because if you don’t validate your findings, you won’t have the conviction to trade it when the drawdown comes (I can guarantee it).

But if you do the work, validate your findings, and know you have a trading strategy that works — it’s a gamechanger for you.

You minimize the fear of losing because you know your trading strategy has an edge in the markets.

You minimize the fear of the unknown because you know what’s your maximum drawdown, average winning rate, losing rate, risk to reward, etc.

You won’t constantly look for the next “best thing” because you have something that’s proven to work.

In other words, if you validate your findings, you increase your odds of becoming a consistently profitable trader.

You get swayed by the noise the out there

Do you know there are 1.7 billion websites?

Yes, you read me right. Billion with a B.

So, when new traders want to learn about the markets, they get overwhelmed!

You’ve got stuff like Forex, Options, Stocks, Futures, Indicators, Price Action, RSI, MACD, Elliot Waves, Fibonacci, Stochastics, Pivot Points, etc.… and I’m just scratching the surface.

Where do you start?

That’s why if you want to learn how to trade, you must start with the end in mind.

This means you must know what’s your end goal and then work backwards from there.

Here’s an example:

  • Let’s say you have a full-time job and want to trade part-time
  • Your goal is to beat the markets earning anywhere from 10 – 20 % a year
  • You want a trading system that’s rule-based so you can follow it consistently without second-guessing yourself

Now once you’ve defined your goals, it helps you filter out the noise and focus on the things that matter.

In other words, you can ignore Price Action Trading, Day Trading, Elliot Waves, Chart Patterns, Support and Resistance, etc. because it’s subjective and not what you want.

Instead, you should focus on systems trading on the Daily timeframe (and above) as this meets your criteria.

Can you see how powerful this is?

Next…

You’re doing it alone

Remember when you were in school?

You had a teacher for every subject to learn from.

Outside of classes, you had a coach (whether it’s football, basketball, and etc.) to provide feedback so you can improve your game.

And even when you’re “chasing” the girl of your dreams, you have buddies (who are expert at the game), giving you advice, tips & tricks on how to win her over.

Clearly, at every stage of your life, you had someone experienced to give you feedback, advice, and knowledge.

But when it comes to your trading career…

…you’re doing it alone.

And by figuring things out yourself, you face questions like…

“Does this trading strategy work? Do I have an edge in the markets? How do I know what works and what doesn’t?”

Now, I’m not saying you can’t make it on your own.

You can… with hard work, determination and paying HUGE fees to Mr Market.

But imagine:

How much time, effort and money you’ll save if you have a mentor?

In case you’re unaware…

Paul Tudor Jones had Eli Tulis as his mentor.

Jerry Parker had Richard Dennis as his mentor.

Stan Druckenmiller had George Soros as his mentor.

Every one of these legendary traders had someone to guide them to take their trading to the highest level.

What about you?

You don’t have the correct expectations — here’s the reality

Let me share with you a secret…

During my university days, I had a dream of becoming a full-time trader straight after graduation.

No bosses to answer to.

No need to work for any company.

No need to participate in any politics.

My plan was to take my entire savings of $5,000 and borrow another $5,000 from my dad (for a total of $10,000) to trade full-time.

I figured if I could make $2000 per month, then it’s enough for me to survive and fulfil my dream.

And that’s what I did.

But 6 months into my “trading career”, things didn’t work out the way it’s supposed to.

Not only was I bleeding my trading account, but I also relied on my parents for financial support.

It’s then I realized I didn’t have the correct expectations to start with.

Here’s why…

1. No proper skillset

Here’s the thing…

I attempted to trade full-time without having the proper skill set.

Let me ask you, would you allow a surgeon to operate on you if all he/she did was read a few books?

Heck no!

2. Lack of trading capital

If you think about it, I needed a return of 30% each month to meet my living needs (which isn’t realistic).

This resulted in the “need to make money” syndrome and caused me to break my rules — and led me to take on losses larger than expected.

Bottom line?

Trading isn’t a get rich quick scheme.

It’s a money-making skill to grow your wealth steadily in the long run.

You don’t have this most important thing in trading

I used to think…

Trading is 80% psychology.

Trading is about following your plan.

Trading is having proper risk management.

And it’s true.

But, it’s useless if you don’t have an edge.

This hit me hard when I read Market Wizards and Jack Schwager said something along these lines…

Imagine you’re going to gamble in a casino.

You adopt proper risk management and keep your bets small.

You psyche yourself up with positive affirmations like…

“Lady Luck is shining on me!”

“I will make a killing today.”

“I’m unstoppable!”

Well, guess what?

You’re still going to lose.

Why?

Because you don’t have an edge over the casino.

Without an edge, even the best risk management and psychology won’t save you.

The bottom line is this…

If you want to be a consistently profitable trader, you must have an edge.

You focus on tactics, not principles

First, let me explain what tactics are.

Tactics refer to things like entries, exits, best indicator settings, etc.

The problem with tactics is you’re not seeing the big picture (in other words, missing the forest for the trees).

For example, a Trend Following strategy is backed by 5 principles…

  1. Follow the price
  2. Buy high and sell higher
  3. Trade a variety of markets
  4. Risk a fraction of your capital on each trade
  5. Trail your stop loss

If you follow these 5 principles closely, you have a good chance of making money in the markets.

But, if you focus on the tactics like the entry point, stop loss or chart patterns, then you’re missing the big picture.

So the lesson is this:

Always focus on the principles first, not the tactics.

Because you can have the “best” tactics in the world, but if it’s built on wrong principles — you’ll still end up with junk.

At this point…

You’ve discovered the biggest reasons why traders fail and how you can avoid it.

Now here’s what I’d like to know…

What’s the biggest takeaway you had from this post?

Leave a comment below and share your thoughts with me.

  • Trailing stop means you have to leave you trading o;, on your computer 24/7. The server in MT4 does not recognize your trailing stop. If your computer is off your trailing stop order will not be active in the market. A lot can happen.

    • You can always set up an always on box on AWS (or any other cloud server environment). Sure there will be a small fee, so its pretty much based on you dedicating yourself to a plan. You can also just buy a small dedicated always on mini server (but cloud more reliable)

  • Very nicely written. With just a few figures, it would be perfect. It could go like this: in trend following, you win 30% of the time. By wonderful calculations, you end up with a possible streak of 25 consecutive loosing trades. That’s what psychology is about, you should not give up. And having an edge is when you win money even under adverse conditions because risk/reward ratio is great. The testing strategy must be analyzed with statistical approach, and this gives lot of confidence for the future.

  • I love this ..It’s hard truths. “Trading Is not a get rich quick scheme but to make wealth over time ”
    “Have an edge” …What’s that ? Pls explain !
    I believe that trading is gambling nothing more .It is like a well organized betting game with some modifications. That’s why no strategy is 100%.
    I wont recommend it for anyone not even my worse enemy ….

  • “Let me ask you, would you allow a surgeon to operate on you if all he/she did was read a few books?”
    This point has has opened my eyes and i had to check my personal develpment abt Fx markets.the market itself has proven me that can’t give you money you dont desrves consistently

  • All completely true not a word of bs. However finding good mentors is a problem. You a good mentor but beyond you there’s a massive amount bs books/courses out there it’s a needle in a haystack finding ppl like you . Much time is wasted searching in the wrong direction coz something looks interesting .The real junk is quite easy to seperate but as an inexperienced trader it’s easy to get caught up with the seemingly good stuff

  • I am alone in FX trading, need to work hard;
    I need an edge to beat the market; and
    I should focus on trading principles, not the tactics.

  • As a green horn in forex trade,i have been obssessed with what i now know as “tactis” infact,the inexplicable appearance of charts had frightened me like nightmare.I have put all my focus on tacts but now i know why i lost heavily on my yesterday demo trade
    Teo,pls,explain.Do we buy high or low after the signal candle(s)?
    Instant execution,how different is it from price tracking?

  • Validating your trading strategy through back testing to find the right strategy that works for you. The right strategy always includes loses that you manage to keep small by following the strategy rules and letting profits run to maximize profits. I am also slowly becoming a believer in scaling out of the trade to take a nice profit but allowing for bigger future profits (or not).

  • Hi Rayner
    I’m new in this game, started reading books and following you and your blogs in December. I agree with everything you mentioned, especially about finding a mentor. My challenge is that I don’t know any trader locally that I can ask for mentorship. How do I go about finding a good mentor and does it have to be someone I know locally, or can it even be done online with someone living far from me.
    Thanks.
    Clive

  • My takeaway here is that firex trading is not a get rich quick scheme.

    And, we MUST focus on principles first before tactics.

  • The hardest decision I have had to make is to buy the stock and wait for it to rise over time, or buy the options. I have not been very successful in options because I have not been following the price. I have been following the news. Now that I have you as a mentor, then I will apply your principals, and follow the price.
    You are correct! Everyone needs a coach!
    Thank you for reaching out to me.
    Sincerly,
    Michael Vandiver

  • Hi Reynor

    Just want to thank you, I’ve been trading since 2016, but only after finding you a couple of months ago have I been making real progress in my trading, I’ve been trading using your trend following strategy, and via back testing I’m learning that I am actually profitable long term. I havent even started using capital, and only trade using demo accounts, and I won’t until I’ve streamlined my strategy to get the edge you’re always talking about. And that’s what I took out of this article, finding an edge.

  • Wow!!! This is really a very good course, Rayner thank you so much, i need your help as a beginner in trading, as i just started today and i came across your classes and they pushed me to start this trading journey with you. You are so skilled !!! I want you to be my mentor in this course, help me to achieve my dream of being successful in trading.
    Look forward to hearing from you, thank you, God bless you.

    • HI Ashiru,

      If you are new to trading then I highly suggest going through Rayner’s trading academy here: https://www.tradingwithrayner.com/academy/

  • I didn’t realize I was trading with tactics and missing the big picture. I’ve heard you say this before but until last night apparently I didn’t know what you meant. Trading the big picture of the market leads to much larger returns rather than simply trading your strategy in the moment.

  • Very good.
    The best ones
    1. You do it alone – due to shy
    2. No mentor – many vedios discourage traders to attend classes and acquire knowledge.
    3. Individual effort in developing a good strategy is lacking in all the losing traders.
    Thanks for posting such vedios.

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