This Saturday I had an interesting discussion with a fellow trader who’s been successfully trading the markets for longer than I have. He told me that he’s had guys come to him for help before (having heard that he knows how to trade) and he will ask them to please read a certain trading book. The next time that person talks to him they tell him that they purchased the trading book and are reading it. And so he asks them, “Do you have the book right in front of you?” When they invariably say yes he says, “So on page 114 paragraph 2 what does it say?” 9 times out of 10 they log off IM and he never hears from them again.
To me this is an incredible story. The “average trader” doesn’t have the commitment to go purchase and read a book that is $15 and then has the audacity to lie about it. What does this say about the “average trader”? In my mind they are a total joke. No wonder 95% fail if this is the pool of “average traders” that exists. I mean how is that trader going to actually test a methodology if they can’t commit to something so simple? How will they ever endure the painful and psychologically debilitating process that is a prolonged drawdown? The answer, I believe, is that they cannot. And that is why 95% fail.
But for those of you who are capable of the blood, sweat, and tears that are required to learn about, create, and test trading systems I feel very confident that 95% of you will succeed. Where did I get this statistic from? I just made it up. But seriously, I have never met a trader that has done his homework for 3-5 years who hasn’t been successful. Thus, in my mind the only trader that I ever have to really compete against are the 5% that can actually do their homework.
For myself I have my own litmus test as to the longevity of a potential trader. Can you commit to testing your trading idea (either candle by candle, backtest, or forward test) for at least 60 trades? If you cannot do this simple exercise then quit now, for you will never succeed. If you can then congratulations! Welcome to the 5% club.