The single thing that sets apart trading winners from losers

What’s the most important thing for trading success?

• A good trading strategy?
• Deep pockets?
• Good money management?

Sure, all those things help. But I can think of plenty of examples of great, successful traders who’ve not ticked these boxes. Maybe they started off with very meagre funds … and most have had periods when their trading strategies have been flawed … and when they’ve made mistakes in money management.

But the single thing that sets the winners apart from the losers is more fundamental.

It’s the crucial factor that you probably don’t notice when their trading systems are on a roll, when they’re raking good profits.

Instead, this is the factor that comes into play in the tough times. When losses have mounted up.

The vital difference between them, and those who’ve fallen by the wayside is that they haven’t given up.

If you give up trading, you’ll be in some good company. It’s estimated that around 80% of day traders give up in the first two years. And there’s no reason to think that many of those traders couldn’t have gone on to be highly successful.

To understand why some traders persist, it’s worth looking at why others don’t.

What are the reasons traders give for stopping?

I don’t feel that I’m making enough money to justify my efforts.

I took a bad loss that shook me up.

I can’t seem to make any money – this is a mug’s game.

There are too many charlatans out there trying to make money at my expense.

I’ve run out of funds.

Every time I make a profit, I just seem to give it back.

I’ve heard all these reasons given. And I’ve had exactly these kinds of thoughts in my own head – many times.

None of these are unreasonable thoughts – which is why they are so compelling to that 80% of traders.

So, what’s the reality behind these reasonable objections?

Is this a mug’s game?

There’s an image of the home trader as some kind of naïve fool who thinks they can beat the system. This picture paints us as little more than gamblers, throwing good money after bad.

And there’s no shortage of unscrupulous people out there who’d like to trick us out of our money in return for a dubious investment, be it someone who claims to know what bitcoin will do next, or has some binary options scheme to flog.

But it’s an error to think that we should leave our investments in the hands of the ‘experts’ – in fact, the ‘little guy’ can produce far superior returns to some fund manager. If you’re in any doubt about that, I suggest you take a look at the average return most fund managers achieve, or have a read of this blog post.

Trading is definitely not a ‘mug’s game’, but there are plenty of traders out there with unreasonable expectations of what can be achieved through trading. And these unreasonable expectations leave us open to manipulation by people who want to sell us that fantasy.

Successful trading is about finding a balance between having a positive, but realistic outlook.

But what about when we’re losing money?

It’s easy to feel motivated when we’re making money. But no trading strategy wins all the time – even the very best ones.

Of course, there’s a practical side to dealing with losses – even the most confident and dedicated trader can run out of funds if the loses keep mounting up. So, to ensure you’re able to keep going through the rough patches, you’ll need a plan of action, which should include details of how you’ll reduce risk to preserve your funds.

(You can find out more about practical ways to manage drawdowns HERE and HERE.)

But there’s a lot more to keeping going than finding the funds. It’s about staying motivated.

How do we maintain a Zen-like calm through the downs as well as the ups?

Trading isn’t like other jobs. Most jobs have an obvious motivation beyond the financial. If you’re a doctor, you want to heal people … if you’re a teacher, you want to educate your students … if you’re an architect, you want to construct a beautiful building. And in any of these jobs, having your fees cut, won’t directly affect how you feel about your work – although it may affect how you feel about your employer!

For a trader however, if you don’t make good money, you’ll question why you’re doing it at all.

The amount of money we’re making will directly affect whether we believe we’re any good at trading, and whether or not we should give up.

So a losing trade can hit a trader’s self-worth very hard.

If you want to achieve long-term success, you’ll need to have separated your self-worth from your profit curve – and that means being in it for more than the money. Instead, the aim of the successful trader is that sense of satisfaction in beating the markets to build something really substantial for their future.

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