by Bob Stokes
Updated: October 01, 2018
Most market speculators dream about trading their way to wealth.
But, also, most discover very quickly that their list of trading "dos" and "don'ts" is just not sufficient.
The hard, cold truth is that most will fail. According to brokers' statistics, up to 90% of all traders will end up losing money. It's a steep hill to climb.
But, there is a way. As you keep reading, you'll discover how to get important insights into what makes traders successful.
In the meantime, let's start off with some words of warning from professional trader Peter Brandt, who contributed this to the April 1991 Elliott Wave Theorist (Brandt's insights are timeless):
I believe that it takes a minimum of 3 to 5 years for a person to learn enough about speculative markets and the speculative process to become a successful trader. I also believe that every successful trader has his or her unique approach to trading. I have not known two successful traders that operate in the same exact fashion. Each has found a special niche that seems to fit his personality.
The major problem is that the vast majority of individuals (80-90%) either burn out their pocketbooks or their emotional will to continue trading before they figure out the rules of the game. This is a cold and harsh reality, but a reality it is.
Robert Prechter explained why successful traders are few and far between in the June 2004 Theorist:
This discussion about the natural tendency of people to apply physics to finance explains why successful traders are so rare and why they are so immensely rewarded for their skills.
There is no such thing as a "born trader" because people are born -- or learn very early -- to respect the laws of physics. This respect is so strong that they apply these laws even in inappropriate situations. Most people who follow the market closely act as if the market is a physical force aimed at their heads. Buying during rallies and selling during declines is akin to ducking when a rock is hurtling toward you. Successful traders learn to do something that almost no one else can do. They sell near the emotional extreme of a rally and buy near the emotional extreme of a decline.
The mental discipline that a successful trader shows in buying low and selling high is akin to that of a person who sees a rock thrown at his head and refuses to duck. He thinks, I'm betting that the rock will veer away at the last moment, of its own accord. In this endeavor, he must ignore the laws of physics to which his mind naturally defaults. In the physical world, this would be insane behavior; in finance, it makes him rich.
Unfortunately, sometimes the rock does not veer. It hits the trader in the head. All he has to rely upon is percentages. He knows from long study that most of the time, the rock coming at him will veer away, but he also must take the consequences when it doesn't. The emotional fortitude required to stand in the way of a hurtling stone when you might get hurt is immense, and few people possess it. It is, of course, a great paradox that people who can't perform this feat get hurt over and over in financial markets and endure a serious stoning, sometimes to death. Many great truths about life are paradoxical, and so is this one.
Prechter won the United States Trading Championship in 1984. He made approximately 200 short-term trades as he followed hourly market data over a four-month period.
After reflecting on his trading experiences, Prechter decided to write down the guidelines you really need to trade the financial markets successfully.
Get the free report, "What Every Trader Really Needs to be Successful."