One of the biggest obstacles to achieving a goal is having an unrealistic plan, a plan that is unlikely to work even with luck on one’s side. It may seem a little cynical, but trading is a profession where many novices hold unrealistic expectations. Trading success eludes many, and a half-baked plan is unlikely to work in the long run. To succeed as a trader, it is vital to have a plan that is clearly thought-out and realistic.
It is natural to think trading profitably is easier than it actually is. It takes relatively little capital to open a brokerage account, and once many novices have opened an account, they tend to let their mind make a giant leap and start to think that it is possible to turn profits from a small account into a livable wage. It is unlikely to happen. You’d have a better chance of winning the lottery.
A true, but distasteful, axiom of trading is that many are drawn to trading but few realize success. As most seasoned traders and coaches will tell you, many aspiring traders blow out their entire account in a few months. So you need to be honest with yourself. Trading maybe a little like learning a sport, but in the final analysis, it isn’t like learning a sport.
Learning a sport or skill is much more doable. You’ve got to entertain the idea (but not necessarily truly believe it) that trading is a lot like winning the lottery. One buys a few tickets with the hope of winning a $10 million jackpot. It may not seem pleasant to think about your odds of success in that way, but you must at least entertain the idea that success may elude you unless you are willing to make the sacrifices and commitment to master the markets.
In the end, trading is a business. You need the right equipment, enough capital, and a serious business plan. Many businesses fail every year. Why? Businesses fail because they don’t have a realistic plan. Whether it is a restaurant in the wrong location or an innovative new product that can’t be manufactured profitably, if you don’t have a well-designed business plan, you cannot succeed.
It is the same with trading. You must have adequate capital so that you can live through the learning curve and the occasional drawdowns. You must have enough time and energy to hone your trading skills. You must have proper training so that you don’t make obvious, preventable mistakes. If you meet the prerequisites, you’ll significantly raise your odds of success.
If you decide to stay in the business of trading, it is essential to have a realistic, long-term plan. That said, there are many paths to successful trading. Not everyone needs to trade for a living. It is possible to have a small account and make a little money as a sideline. Other traders can trade their own account and make a living. And there are the rare few who can scale up and trade professionally as a fund manager.
But whatever you decide to do, you must make sure that your plan is realistic. It may be hard to psychologically face, but you must truly and realistically discern what you can do with the financial and psychological resources you have. If you can develop realistic goals and a game plan to achieve them, you’ll eventually realize financial success.