When Can You Call Yourself A Trader?

Statistics say that over 95% of traders fail.

We read that all the time and it really shows up in marketing material for the latest and greatest trading system.

That number is enough to make anybody doubt their ability to find trading success. After all, many people compare themselves and their potential with someone else.

For all the mention of 95% though, it does bring up some important questions and highlights an aspect that you must have to have any chance of success.

When do you consider yourself a trader?


Define What A Trader Is

The barriers to entry with trading are pretty low. A few hundred dollars get you into a trading account where you can buy and sell an instrument. At these low amounts, you are probably entering the world of Forex trading.

Using the following standard definition, that would make this person a “trader”.

“A trader is person or entity, in finance, who buys and sells financial instruments such as stocks, bonds, commodities and derivatives, in the capacity of agent, hedger, arbitrageur, or speculator. – Wikipedia”

It doesn’t matter if the person found their way into the markets via a $97 e-book or through years of training and experience, they are grouped into the same category.

It also does not matter if person A is losing money and person B is making money. They are both classified as traders. If someone asks what I do, if I own a football and play on the weekends, I certainly would not say I am a football player.

Saying I was a football player would suggest I play football for a living…which I don’t…but the definition fits.


When Can You Say You Are A Trader?

Just like picking up a guitar does not make you a musician, entering an order to buy or sell does not make you a trader. You are “trading” – but are not a trader.

So when can we take that failure rate with traders as something meaningful?

Some ideas that you can ponder:

  1. If you reach a goal that you set for yourself in terms of consistency
  2. If you have taken a laser focus approach on your trading method, trading risk, and trading psychology.
  3. If you are displaying the same characteristics of certain traders you admire.

If this all sounds like semantics, that’s fine.

In the trading world, I think it’s vitally important to be very clear on all aspects of the business from your trading method and risk all the way down to labels.


Definition Of Failure – Be Clear

In order to say someone has failed, we must know what the ultimate goal was for them and if they have stopped going after that goal

  • If the goal for someone placing a trade was to be able to meet all financial obligations in their life, they fail when they give up on that quest
  • If the goal was for extra income to cover a car payment and they meet that goal, they didn’t fail. They succeeded.

Is a blown account a sign of failure?

Any trader that has found success has probably lost money and no doubt has had to replenish their account. They didn’t fail with a blown account if they accounted for that occurrence and had a plan to continue on the road of experience.

Planning on losing money as you become educated is rooted in reality.


When Do You Become Part Of The Failed Trader Club?

Again, that is up to the individual however I believe the 95% statistic comes from brokers where traders are losing more than they make. We are still unable to parse together the intentions of these people when they open their trading account.

That is why statistics that are tossed out without any context are meaningless. You need the raw data and an agreement on what a trader is.

We don’t have that and it makes sense that you decide what failure means to you.

You must be immune to suggestions, trading tips and focus on your approach to the market. Do you let other people define your:

  • Risk appetite
  • Trading approach
  • Trading goals

If not, don’t let them define what failure means to you.


More Than Making Money

You’re are going to lose money at first and if an equity curve that heads north is your expectation and a measure of your success, you are going to be disappointed.

You are going to be frustrated and feel like a failure. You will fall into all the traps that finish off accounts such as revenge trades and too much risk.

You need something else that will keep you fighting for your dream and that is an absolute passion for trading and everything that makes up the business.

Passion is the only thing you can’t buy when it comes to trading. It can’t be taught.

What is the “why” behind trading?

Have you written out why you want to trade? If you wrote simply “money”, how about taking the time to actually putting the effort into asking yourself why you want to trade?

What is it that you want from trading? Besides money, what will it give you?

  • Freedom? What is freedom to you?
  • More time with family? Why is that important?

You are going to want to be very clear on why you want trading success. It will be those reasons that keep you on point and focused on your trading plan.

From the analysis to the record keeping and review, you will want to approach your trading desk with passion. One of the reasons there are only so many professional athletes, high end surgeons, top business people, and of course successful traders….is they have an undying and strong passion for what they do.


95% Failure? Ignore It

That statistic has no doubt kept many people from entering trading. When people struggle, I am sure many of thought “Many fail so I guess I am not cut out for trading either”.

Ignore the 95% failure rate. It is a number that can not be quantified. It is a dangerous statistic that has no context but can mess with a beginning traders psyche

The best thing is to focus on your approach comfortable with the fact that while trading is hard, it is not impossible. Make your goals bigger than your excuses, buckle down, and get to work.

Author: CoachShane
Shane his trading journey in 2005, became a Netpicks customer in 2008 needing structure in his trading approach. His focus is on the technical side of trading filtering in a macro overview and credits a handful of traders that have heavily influenced his relaxed approach to trading. Shane started day trading Forex but has since transitioned to a swing/position focus in most markets including commodities and futures. This has allowed less time in front of the computer without an adverse affect on returns.