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[Link] 3

Hey, Aaron here.

Again, I’d like to say to you, thanks so much for purchasing

this guide. I hope the value of the content within this guide far
@ChatWithTraders outweighs the small cost to purchase.

Chances are you’ve already heard many success stories

about legendary traders who went from zero to hero in the
span of their career. While these stories are great (and often
motivating), when you dig a little deeper, you’ll discover that
in order to get to the top they had to overcome adversity and
immense challenges – challenges that are proven to drive most
traders out of the business altogether.

And since no one sets out with the expectation of being

another washed up trader, I believe there is immense value to
understanding WHY most traders never succeed. When we’re
aware of the reasons for this, then we can better align ourselves
to create our own success story.

What you’re about to read are the most common reasons for
crippling failure, given by eighteen of the reputable traders
I’ve interviewed. While this guide is somewhat compact there’s
plenty of wisdom to absorb, so I encourage you to put in a few
reps, just to ensure you don’t brush over anything important.

Be great.

Aaron Fifield,
Chat With Traders
Here are the responses from eighteen high-performing
traders, I interviewed between January-August of 2015.
[Link] 5

Jerry Robinson
Swing trader · Investor · Economist · Best-selling author · Founder of FTM Daily

What’s the reason why most traders never succeed?
@FTMdaily

No system. The majority of traders don’t have a system. They’re

attracted by the amount of money they can make, and the lifestyle
that trading affords.

Although I’ve got to admit, the lifestyle is very good when you
succeed as a trader – you have the ability to work from anywhere
in the world. I’ll tell you a personal story about one of the very
first traders I met, it left this lasting impression on me. In fact
this might be the most motivating thing that drove me to become
a trader…

I met this older guy (who was probably in his late sixties), he
had a yacht which he lived on for 5-6 months out of the year,
with his wife. He would trade during the first few hours each
morning and close his computer by midday – he was done. He
would trade companies like Walmart and IBM, and he would
make $1,000-$2,000 each day using options. Because he had a lot
of money, when IBM or Walmart moved 10¢20¢ he would make
a lot of money with very low risk. I saw what he was doing I was
like, ‘You’ve got to be kidding, this is fantastic’. Because at the
time I was working a slob-job where I wasn’t happy and I’d think,
‘Man, I have to make my life something like this’.

With the Internet the way it is now, computers and everything

we have access to, you really can trade from almost anywhere.
[Link] 6

You can do it from a yacht (out in the middle of the ocean), or

from home in your pyjamas. Trading is really sweet in that
respect. But often new traders see this and they caught up by it,
they forget that in order to get there they have to have a plan. So
“Many times, many times, people are excited by the dream and vision of what
people are life could be as a trader, but they don’t build the bridge and set

excited by the forth the hard work that’s required to get there.

dream and I went through a period where I lost money for an entire year. It
vision of what was the worst time in my trading career; I could not make money
life could be to save my life. I was incredibly frustrated and I almost threw
as a trader, in the towel. And I think back on this time – what if I had done
that?!
but they don’t
build the This is one of the things that I tell new traders; do not give up if
bridge and set you really want this. If you really want to succeed, if you really
forth the hard want to have that lifestyle that you have in your mind then you
work that’s cannot give up, you have to continue. When you lose money you
lick your wounds and keep going, but if you stop trading then it’s
required to get
over. Now I will say this, if you don’t have a system that’s not my
there.”
recommendation to you, because you’ll continue losing money.

JERRY ROBINSON
Here’s the thing you must remember, the guys on Wall Street are
smarter than you, me and everybody that we know put together.
Or if they aren’t smarter than us, they’re certainly more slippery
than we are (that’s a cultural way of saying it, trading is a dirty
game). They see guys like you and me coming a mile away. When
we type in an order for 100 shares of a particular stock, they know
exactly who we are, and they know how to shake us out and take
our money.

So that’s why it’s important for traders to have a system, not to

[Link] 7

give up, and to understand that you can’t do this without gaining
some knowledge and experience.

Now there’s a lot of seminars and coaching programs out there,

many of them are thousands of dollars – I’ve never done any of
those yet I still succeeded. Instead, I read through many trading
books, looked at strategies used by other traders, and started
experimenting with some of them. This is how to find out what
works for you. Sit down, take the charts that you trade, print
them out and draw on them. Look at them and become intimately
familiar with the tools of your trade. But most of all, realize that
it’s going to take time.

Unfortunately there’s a lot of TV infomercials and websites out

there that make it sound like ‘anybody can make a million dollars
overnight by trading this one stock that you don’t know about,
but I do, so pay me and I’ll tell you’. No, it doesn’t work that way.
You have got to have a system of your own, if you want to do this
long term.

Aaron’s take:

• To survive and excel as a trader, you must have a set of rules

or parameters (a system) that you can stick to. Without this,
you’ll only ever be as great as your last guess.

• High priced trading education is not absolutely necessary.

What is necessary is a genuine drive to succeed and the
perseverance to push through times when you feel like
throwing in the towel. Behind every truly successful trader
are many years of hard work and grit.
[Link] 8

Steve Burns
Options trader · Author of New Trader, Rich Trader · Founder of New Trader U

What’s the reason why most traders never succeed?
@SJosephBurns

Risk management is a universal principle amongst the traders

who have ‘made it’ over a long period of time. This goes to show
that if you cannot manage risk, and you put your entire account
at risk enough times, you will eventually blow up. As Victor
Niederhoffer found out, even though he was an amazing trader
who had some of the best returns ever, he blew up several times
due to poor risk management. So if it’s too costly for you to be
wrong once, then you will blow up at some point.

You also need strict discipline to follow a trading plan. Without the
discipline to follow your plan, it becomes worthless. Regardless
of how good you are as a trader, if you don’t have the discipline
to maintain correct position sizing, and continue taking entries
and exits as specified in your plan, you’re not going to make it.

Besides poor risk management and a lack of discipline, the other

reason why a majority of traders fail, is due to their inability to
react. Many trading legends were successful because they had
the ability to react to what was happening (going all the way
back to Jesse Livermore, and Nicholas Darvas). Where as some
traders focus on predicting (instead of reacting) and believe they
cannot be wrong, which means they’re also likely to blow up.

There’s also perseverance. If somebody decides they’re going to

be a winning trader and they’re not going to stop until they are,
then generally only time separates them from success.
[Link] 9

Aaron’s take:

• Without a sound understanding of how to manage risk, you

will eventually run your account into the ground. No one
trade (or series of trades) should have the potential to take
you out of the game. Trade positions relevant to your account
size.

• When you lack the discipline to follow your trading plan,

stop - you’re moving into dangerous territory. Get to the root
of the problem and figure out what’s gone wrong before you
continue. If this means sitting on the sideline for a few weeks
or a few months, that’s fine. The market will still be there
when you’re ready.

Peter Zhang
Major in Quant Finance · Partner at Sang Lucci · CEO of Flammarion Capital Partners

What’s the reason why most traders never succeed?
@PZ_SL

Unfortunately, many aspiring traders are looking to get rich

quick... They’re either looking for fish*, or looking for services
that give them picks, and many times, they get addicted to a
couple good trades even though they’re losing money over time.

I’ve seen these traders go down the spiral of, ‘I just need a better

* Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.
[Link] 10

service provider’. Instead of owning up to the fact that they don’t

know how to trade, they continue following everybody’s picks.
They’re stuck on a vicious cycle (like a gambling addict), where
they just continue to find more and more service providers, they
continue to dump money into them, and they cannot come to grips
with the fact they don’t know how to trade. They never even get
to the point where they can adjust their own psychology, because
they’re not even really trading – they are just piggy backing on
others. I feel like that’s a large majority, unfortunately.

Then there are those who are really trying to trade; they may
open a prop account, seek out a good education, and they learn
some of the best practices. But a lot of times, the difficulty for
these traders is they may not be losing money, they’re just
scratch (floating around breakeven). Which may indicate they’d
be better off as a maker in the market versus a taker – meaning
they don’t cross the spread, and that’ll actually turn them onto
profitable trading.

Another issue for traders in this category is, they don’t learn real
stomach tolerance. So they always get stuck ordering position
lots of 200/500/1,000 shares. They haven’t come to terms with the
reason why they’re making mistakes, is because they don’t have
the right stomach tolerance. They can’t think in terms of, ‘If I
buy 1,000 shares at this breakout right now, I can make a couple
hundred dollars or breakeven. So maybe I should just buy 2,000
shares, because that’s how I’m going to make greater amounts of
money’.

Therefore, as a hand trader they’re not what we call ‘linearly

scalable’, because their emotional tolerance and stomach
tolerance doesn’t scale this way. They need to learn the art of
[Link] 11

working an order into a trade, and letting trades breathe a little

more - these are more professional hand trader ways of looking
at the market. Although it’s tougher to quantify, this is often an
area where they can scale up their trading to go from breakeven
to profitable. It will require them to learn a little more, as well
as learning more about themselves. It’s just unfortunate a lot of
traders are not in the camp of learning how to fish, and they
don’t look in the right areas.

So most of the time, the deeper problem is right there within

themselves and their inability to project properly onto the
markets. They’re not able to look back and say, “I did not have
a good morning, and therefore I’m going to make sure I trade
“It’s really hard 50% less than I usually trade this afternoon”. It’s really hard for
for traders traders to come to terms with the fact that it’s actually their own

to come to ego which prevents them from being successful. And many times
they’re taking trades while trying to match their ego with the
terms with the
next best trader.
fact that it’s
actually their It’s important to understand your own psychology, who you are
own ego which as a person, what your lifestyle is like, what your behavior is like
– and learn how to use this to your best ability.
prevents them
from being Personally, I know I hate breakouts. So if it’s a breakout market
successful.” I’m actually going to scale back. I like when the markets are
choppy, I’m a premium seller. Therefore I know when I should be
PETER ZHANG increasing my exposure and playing a little more aggressively –
if it’s my type of market.

Unfortunately traders in the first year (or even two years)

are generally looking for those hot picks, and they don’t ever
get to the point where they can actually try to do a little bit of
[Link] 12

reflection. That’s just the unfortunate nature of the ‘greed’ that

is sold out there. It’s very hard to be reflective and that’s one
of the unfortunate truths for aspiring young traders (even older
traders, it’s sometimes harder for older traders who are trying
to learn).

Aaron’s take:

• Blindly following another person’s trades is not the way to

develop real trading talent. Forget alert services, save your
money and focus on learning how to form your own trade
ideas.

• An ignorance of market microstructure will occasionally be

the cause for unprofitable trading. Although as you zoom
out by timeframe this becomes less likely. But nevertheless,
market structure affects each and every participant, so it’s
beneficial to know what goes on below the surface.

• Make a conscious effort to increase your stomach tolerance,

over time. This means you become more comfortable with
taking losses, which will allow you to scale effectively, and
trade advanced methods when you’re ready to level up.
[Link] 13

Zach Hurwitz
Equities trader · Trading coach · Systems developer · Founder of [Link]

What’s the reason why most traders never succeed?
@ZachHurwitz

Many traders fail in the moment because of poor risk

management, arbitrarily oversizing their trades. But they also
fall short in terms of focus – rarely will traders master a single
subject, let alone ever build skill in many subjects. Style drift
depletes a trader’s energy, time, and enthusiasm.

“Rarely will It’s understandable that traders can’t choose one style easily
traders – where do new traders even begin? – and so they often let

master a popularity proxy for ‘success’. After they’ve slugged through a

myriad of ‘common’ approaches, they’ve got little left to devote
single subject,
to a subject worth mastering (once the trader finally stumbles
let alone
across a worthwhile strategy).
ever build
skill in many I’m guilty of this, too. Early on I explored options and futures
but found myself drawn back to equities (and more importantly,
subjects.”
pattern-based trading). Once I recognized my strengths – and
perhaps more importantly, identified what fulfilled both my
intellectual curiosity along with my financial needs – I stopped
spinning my proverbial wheels and began building sustained
progress. Sustained progress builds confidence; confidence
leads to consistency; consistency is what we all seek in our own
trading.

[Link] 14

Aaron’s take:

• Many traders fail to ever master a single strategy. Therefore,

they never learn the full process of how to develop mastery
with anything they attempt. Continually changing strategies
is an energy drain and a time suck. Once you identify an
approach that resonates with you, drive it into the ground
with investigation.

Adam Ryan
Futures trader · Founder of Optic Trader

What’s the reason why most traders never succeed?
@OpticTrading

A lot of aspiring traders give up too soon, because they don’t

realize how difficult it’s going to be to succeed.

Part of the problem is, if you listen to what many educators are
saying, “Trading is so easy, look how I made a thousand dollars
with just 30 minutes of work,” and they really ram it down your
throat. Then you have people who get into trading, thinking
‘wow, this is going to be so easy’. Although once they get into it,
they quickly realize it’s not easy – in fact it’s extremely difficult
and they generally give up.

So I believe that many traders give up too soon, and that’s why
the majority never reach a high level of success.
[Link] 15

Aaron’s take:

• Have an awareness of marketing hype – trading is not

easy. Plain and simple. But on the same note, it’s also not
impossible... So be prepared for challenges, persevere, learn
from your mistakes, and one day you quite possibly will pocket
a thousand dollars with 30 minutes of work. Just don’t expect
that day to come next week.

Lance Beggs
Full-time futures trader · Part-time trading educator · Founder of Your Trading Coach

What’s the reason why most traders never succeed?
@LanceBeggs

There are many reasons…

The first one is their relationship with loss. People come from
different backgrounds and jobs where income is pretty secure.
But in this game you eat what you kill. If you do not perform today
and get a few kills, you do not eat, you make no money. Trading
is a performance activity in an environment of uncertainty, so
you need to expect losses. You need to accept that losses are just
part of the game, and you need to learn how to manage them.
That is something that traders often don’t understand, and you
can’t understand until you’ve got experience – so it takes time.
[Link] 16

Additionally, they don’t have a proper process for growth and

development. Many are looking at this game from a systems
perspective, and that’s why there’s a whole industry geared
around this. The easiest way to make a million bucks trading, I
believe, is to sell systems. There are countless forums filled with
mediocre advice, and failed traders showing their systems. And
this is why many get stuck in the systems mindset. I make fun of
it, yet that’s where I was during my earlier years as a trader.

“Traders aren’t Essentially, they approach trading as a systems game, instead

immersing of one as a process of growth and development. For those

themselves in with the wrong perspective, it would be worthwhile reading

about deliberate practice and effective methods of growth and
the game, in
development.
the study of
price action; By looking for this shortcut, traders aren’t immersing themselves
they aren’t in the game, and the study of price action. They aren’t building
‘deep domain knowledge’. Unfortunately there are no shortcuts;
building
you’ve got to hit the books, hit the charts and study this game.
‘deep domain
All the answers, everything you need is there in the charts, get in
knowledge’.”
there and study them.

LANCE BEGGS To summarize, many traders simply aren’t using the right process
for learning. They’re looking for the quick buck systems and not
treating it as a process of skill development. That’s probably the
main reason, but there are many more traps around – this is not
an easy game.

Aaron’s take:

• Losing trades are unavoidable. No trader has ever achieved

[Link] 17

a 100% win rate, nor do they need to. In fact, the majority of
professional traders are wrong more often than they’re right.
This is where effective risk management comes into play.

• Shortcuts do not exist. The greatest way to reduce your initial

learning curve is with some old-fashioned study of price
action. The answers to your trading success do not rest within
someone else’s neatly packaged system.

Jason Leavitt
Swing trader · Position trader · Founder of Leavitt Brothers

What’s the reason why most traders never succeed?
@JasonLeavitt

First of all, the traders that don’t succeed don’t have a plan. They
just don’t. They hope, they fantasize, they dream, and they want
things to go their way, but they don’t have a plan. They don’t
know what they’ll do if the market goes up, they don’t know what
they’ll do if the market gaps up, they don’t know what they’ll do
if the market gaps up and then sells off. They pretty much just
wing it…

They get into a position and they don’t know where their stop is,
they don’t know if it’s a short term trade or a long term trade,
they don’t know if they’re going to scale out, they don’t know if
they’re going to add a new position if it breaks out and then pulls
back. They literally just fly by the seat of their pants, because
[Link] 18

they don’t actually have a plan.

Think about a football team, can you imagine if they showed up

and didn’t have a game plan – that would never happen! They
spend an entire week looking at game films, and practicing
certain plays based on the type of defense that the opposing team
is likely to play. Then they actually workout and practice many
different plays in order to capitalize on this. And traders have to
do the same thing; they have to have a detailed plan.

Even though 90% of the plan will never matter, at least they’ll
contemplate, ‘What will I do if the market does this,’ and, ‘what
will I do if the market does that?’ If they have ten of these
different scenarios that they’ve thought out, obviously most of
them are never going to happen, but going through the motion
of outlining a plan is an extremely helpful exercise.

All traders need to sit down and say, “What’s my plan for today?
What am I going to do if this happens? What am I going to do if
that happens?” Play devil’s advocate – that’s what they need to
do, but they don’t.

Another thing aspiring traders often do is ‘style drift’. They

constantly jump from one strategy to the next, to the next. One
day they’re swing trading stocks and playing chart patterns,
then a month later they see something on a message board and
get tempted to trade Fibonacci retracements. Now instead of
playing breakouts, they’re buying pullbacks, and perhaps they’ll
slap a new technical indicator on their charts also. So they’re
constantly shifting from one style of trading to the next.

Although in saying this, it is necessary when you first start out.

Because in order to zero in on what works for you, you have to
[Link] 19

experiment with several different styles. But once you do zero in

on what works, you have to stick with it, and avoid the temptation
to go elsewhere. So ‘style drift’ can be a big issue when new
traders are starting out.

“They get into In addition to this, they don’t take a loss. When they get into a
a position that position that goes against them, they should get out, but they’re

goes against afraid of taking a loss, so instead of exiting they bargain and
negotiate with the market. They say, “If it can just go back up, I’ll
them, they
get out at breakeven,” and then it goes against them even more.
should get out,
Next they say, “Well if it can just go back up to where it was two
but they’re days ago, then I’ll get out with a small loss,” but it doesn’t go
afraid of back up, it keeps moving against them. Before they know it, a
taking a loss” perfectly normal loss turns into a huge loss. This creates a major
problem. Not only do they suffer because of the money that they
JASON LEAVITT lost, but also their confidence is shot, their emotions are shot
and it spirals from there…

One other problem that many traders have right now is

‘information overload’. It wasn’t a problem when I first started,
but it is right now. Even though TV is less prevalent now that
it was back then, with all the websites, blogs, and services
(i.e. Twitter and StockTwits), there is no end to the amount of
information you can get. And no matter what a trader wants to
do, or what their opinion is, they can easily find support for that
opinion.

Now, just to recap, these are the main points of failure:

• They don’t have a plan.

• They don’t know how to zero in on one thing, and they’re

constantly changing their strategy.
[Link] 20

• They don’t take a loss.

• They don’t ignore the excessive amount of information that’s

out there.

So if you flip this around and you want to know how to become
successful:

• Have a detailed plan, outlining exactly what you will do in

different scenarios.

• Hone in on something that works for you.

• Make a deal with yourself that you will never let a small loss
turn into a big loss.

• Try to ignore a majority of the information that’s out there,

because most of it’s noise.

Aaron’s take:

• Refer to Jason’s summary above – he nailed it!

John Welsh
Biotech trader · Fundamental analyst

What’s the reason why most traders never succeed?
@JohnWelshTrades

It all goes back to the mental aspects of trading. Many people

don’t understand their personality flaws from everyday life also
[Link] 21

apply to trading, i.e. being insecure, not being humble, needing

support, and needing conformation from other people.

Therefore, if you’re involved with a group (or a chat room), it’s

important to realize that just because the group is thinking one
way, that doesn’t necessarily mean the group is right. Often what
happens mentally, when a group trade goes wrong and a trader
loses money, they then try to chase the loss and make the money
back. But it doesn’t work that way. That’s why a lot of traders fail,
because they’re getting confirmation from other people. They’re
not doing the research and homework themselves.

If you look online, the most profitable (and popular) products

around are alert services. What this tells you is most traders
just want to know what to buy, no questions asked – and those
people are truthfully not making any money. You know, if you
want to learn how to fish, somebody needs to teach you how to
fish. In order to learn you need to be able to study why somebody
is buying, instead of following blindly just because they made a
good call two months ago. So that’s why I believe the majority of
traders fail, because they are too busy following ‘the group’.

Aaron’s take:

• Traits of your personality will often reflect in your style of

trading. Some of these traits will help to you form quality
trading practises, and others may have the opposite effect.
It’s about having self-awareness, and the ability to control
both your positive and negative characteristics.

• Build the confidence and skill necessary to formulate and

[Link] 22

execute your own trade ideas. You are not required to have
the same views as the majority. While it’s often hard to go
against the grain, just remember, most market participants
do lose money. Markets move money from the hands of many,
to the hands of a few.

• Revenge trading – forget it! If you happen to lose money in a

particular stock, there is absolutely no reason to make it back
from that same stock. Leave your ego at the door, and don’t
worry about trying to prove a point.

Stuart McPhee
Equities + FX trader · Author of Trading In A Nutshell

What’s the reason why most traders never succeed?
@StuartMcPhee

Many traders aren’t taking the time to do everything that needs

to be done, in order to trade successfully. They’re not taking
the time to study and understand how to manage risk. They’re
not taking the time to become more disciplined as a person,
and as a trader. They’re also not taking the time to develop a
plan, validate rules and test them, as well as prove and disprove
different strategies. Additionally they’re not taking the time to
become methodical in their process, structured and organized
as a trader.

This means they’re not treating it as professionally as they

[Link] 23

should, and I’m going to say the word again ‘time’ – not investing
the time.

Here’s a great analogy I use…

I play a lot of golf, which is one of the reasons why I don’t like
looking at a screen for ten hours a day. But I am not a professional
golfer, I don’t make one cent from playing golf. In fact it costs me
money; I recently bought a set of clubs that cost a lot of money,
and my membership fees cost a lot of money. While I don’t make
any money playing golf, and I’m not a professional – I still love
playing golf. BUT it’s a hobby.

“Too many And from what I see, too many traders treat trading as a hobby.
traders treat They enjoy it, they spend time doing it, they’re happy to do it,

trading as a but at the end of the day it costs them money. They don’t take
the next step of becoming professional. So to many, trading is a
hobby.”
hobby and not a profession. Golf for me is a hobby, but trading
STUART MCPHEE
demands more of my time and respect.

Aaron’s take:

• To be a great trader, requires an immense dedication of time.

In this sense, trading is no different to any other area of life
where your goal is to ultimately become a pro. Amateurs will
forever struggle, because they do not invest the time to help
themselves breakthrough.

• “There is no room for amateurs in the game of life.” I’m a huge

fan of this quote from Tim Walker, and I feel as though it neatly
summarizes Stuart’s point. If you’d like a detailed explanation
[Link] 24

of this quote, I suggest listening to Tim’s interview on episode

006 of the Chat With Traders podcast.

Adam Grimes
Diversified trader · Systems developer · Author of The Art & Science of Technical Analysis

What’s the reason why most traders never succeed?
@AdamHGrimes

False expectations. I could just leave it there...

When most people go into trading, they don’t understand what

success looks like. They don’t understand what success looks
like along the way as they overcome obstacles, or even what their
ultimate success will look like.

They go into this expecting something other than what they’re

going to get, even if they are very successful. There are a lot of other
reasons that cause traders to fail like being undercapitalized, not
doing the work. Or just going into trading for the wrong reasons.
But I think the number one reason most traders fail is due to
false expectations.

Aaron’s take:

• Setting realistic expectations for yourself as you become a

trader can make a world of difference to your mindset (and
[Link] 25

results) along the way. By setting the bar artificially high, it’s
likely you’ll feel like a constant underachiever. But, also be
mindful not set the bar too low, as it’s healthy to push yourself.

Mike Bellafiore
Prop trader · Co-founder of SMB Capital · Author of The Playbook + One Good Trade

What’s the reason why most traders never succeed?
@MikeBellafiore

It really depends on what type of trading that you’re doing. Many

new traders choose a type of trading, a product, or a timeframe
that doesn’t best fit their personality and their thinking talent.
Specifically; if you don’t think fast, then you’re not going to
become a really good active trader. Instead, you may be better off
as a global macro trader.

Aaron’s take:

• Develop an approach that meshes with your own personality

type. Attempting to trade an approach that doesn’t feel right,
is like trying to force a square peg in a round hole – it doesn’t
work.
[Link] 26

David Bush
Quant trader · Systems developer · 1st Place winner of BattleFin

What’s the reason why most traders never succeed?
@Alphatative

While I certainly speak for myself on this topic, I imagine many

other traders are like this also; we come to the market with rose-
colored glasses.

I still remember looking at my father’s TV, seeing the ticker tape

and this is probably 21 years ago now. So I certainly went into the
market thinking, ‘Wow, there is so much opportunity’. But once
you get thrown down a staircase or two and you’re hurting, you
realize; this risk part is pretty important, that was not fun, and
you don’t want to live through that kind of trade, experience or
drawdown ever again.

“It’s a matter So your lenses constantly change while you develop as a trader,
of being but some people are just going to say, “You know, I just don’t

prepared to want to dig that deep, it’s too challenging. You mean I’m going
to have to look into my psychology, and examine my own belief
dig deep.”
system? Come on, that has nothing to do with trading…” But of
course it does, it has everything to do with trading. Especially as
a discretionary trader, since you’re more prone to succumbing to
biases, and usually with larger positions. So it’s a matter of being
prepared to dig deep.

Just like multiple systems can diversify one’s strategy (by

removing a single point of failure), I like to surround myself
with people who are brighter than me, and who think differently
[Link] 27

than me. This way I’m exposed to more ideas, more knowledge,
and more perspectives, so I’m constantly exposing myself to new
ways of thinking. But I feel like this is more than some people are
up for, and to me, that’s probably the number one reason most
traders fail.

To succeed as a trader, you need to overcome a lot of biases and

be able to take a hard look into the mirror. Understand it can
be rough in the early stages, and it can be rough later on too.
There are going to be bad periods for any approach or strategy,
although as you develop you’ll be better prepared for these times.
Especially as a quantitative trader, because you should know
your risk parameters and the size of a normal drawdown etc.

So if I can condense this down to two words, I’d say ‘digging deep’
– that’s what is required. But some traders are going to leave it at
a certain level and aren’t willing to push on to get to where they
could be.

Aaron’s take:

• The life of a trader is one of constant growth and betterment.

However, some will reach a point where they plateau; they
become comfortable with who they are, and what they
already know – these are the ones who will never reach their
full potential. The ones who go on to become great traders
embrace the fact they don’t know everything, they push their
comfort zone and they’re prepared to ‘dig deep’.
[Link] 28

Ivaylo Ivanhoff
Swing trader · Position trader · Co-founder of Social Leverage 50

What’s the reason why most traders never succeed?
@Ivanhoff

In the beginning most traders don’t have an edge. And even

when they do find a setup with an edge, most don’t concentrate
enough efforts on learning everything about that set up to make
it profitable for them. Most traders will try to trade a particular
setup, but if they don’t see results within a few weeks they’ll move
on to something else. So they constantly jump from one thing to
another, and they never become masters of one particular setup.

I believe that if you learn one great setup, and trade it for the first
couple years you will become successful. Of course you still have
to know when to trade this setup, because there will be times
when you need to sit on the sideline and do nothing (your setup
won’t have an edge in certain market conditions). Over time
you’ll be able to start adding new setups. But in the beginning,
less is more – so you have to concentrate on one specific setup.

The best part is there are many working setups that are shared
for free in the public domain, and many great books that you can
buy for a small cost. This way you can take a working setup from
another trader that you know is already profitable, which you
can then tinker to fit your own lifestyle, or based on your own
study of past winners.

[Link] 29

Aaron’s take:

• By now you should be noticing the theme of ‘style drift’ is

prevalent throughout this guide, reason being, it causes many
novice traders to become stagnant.

• The point from Ivan’s response which I’d like to highlight,

is the importance of understanding when your setup has an
edge. With most setups there will be certain market conditions
where your expectancy to profit decreases. The added benefit
of becoming intimately familiar with a single setup, is you
will begin to pick up on which market conditions deliver
greater results.

Brad Jelinek
Prop trader · Futures markets

What’s the reason why most traders never succeed?
@JelinBra

The first thing you must have is that desire and fight inside of
you – you have to really want to do this. Because as a trader,
everyone goes through tough times and dark days. But it’s that
knowingness and willingness to do anything it takes that keeps
you moving forward. You can’t defeat someone who keeps getting
up after every setback.

The second thing is to learn that when you understand something,

you need to trade it larger. And when you’re not trading well,
[Link] 30

you need to cut down your size (drastically sometimes) and be

prepared to exit positions quickly. If you can do this you’ll stay
alive – and if you’re alive, you’ll be able to figure out a way to
get back to trading normal size again in the future. So it’s about
managing yourself this way, in addition to the desire to succeed.

Aaron’s take:

• Trading will test you, and there will be moments when you’re
pushed to the verge of breaking point. So if you cannot uphold
a high-level of commitment, you will crumble when the going
gets tough. On the other hand, if you have a lionheart and an
undeniable passion for what you do, you’ll be unstoppable.

• When you hit a rough patch, reduce your position sizes. One
may be inclined to do the opposite as a way to reaccumulate
losses quicker, but in reality, this is how things escalate from
bad to worse – fast.

Andrew Falde
Options trader · Systems trader · Educator at SMBu

What’s the reason why most traders never succeed?
@AndrewFalde

One reason is, traders enter the market with a lot of confidence
because they are often smart, or they may be more intelligent
[Link] 31

than a lot of their peers, family or friends. So they look at trading

and say, “Okay, most people fail at this however I am generally
smarter. I have a good head on my shoulders, and when I try to
understand something I do well. I’m also passionate about this.”
They also say, “I have what it takes, because most of my friends
aren’t even interested. So if they were to try they would probably
fail. But I’m well suited for success, because I have other success
in my life.”

I have seen very successful businessmen and investors that come

to trading, and they receive negative feedback from the market,
meaning they lose money. They approach it the same way they
approach anything else in their life…

Lets use sports as an example; if you’re losing, you practice

harder, try harder, learn more and through sheer effort you’re
going to improve and achieve better results. Or in business; you
can work longer hours, cut your prices and make decisions that
allow you to control how you’re going to achieve greater profits.

“They have So in many areas of life, willpower will lead you to overcome the
to learn very issue at hand, and you’ll be rewarded with positive results. And

quickly their those who are attracted to the markets, have often experienced
this in one way or another...
willpower has
no place in the But when it comes to trading, they have to learn very quickly their
markets.” willpower has no place in the markets. Using their willpower
they say, “I’m going to hang on to this trade until I am right. I am
ANDREW FALDE going to will this system to work. I am going to will this trade to
work. I know I am going to be right”. This is the approach they
bring to the market, and the worst thing that could happen is
they get rewarded for it a few times. Lets say they call the top in
[Link] 32

something that’s highflying or up big for the day, and it drops

right away, they’ll say, “Oh, that’s great. I should’ve taken a
bigger size”.

Then it happens a second time and they do it again, this time

with a little more size. But they don’t even realize that the whole
market was consolidating so every pop was faded. Then all of a
sudden the December rally comes and the market breaks out, yet
they say, “Oh well, I’ve been conditioned, I know it works. I’m
going to short this thing.” But prices take off, the whole market
goes up 6%, their stocks go up 11%. Yet the whole time they’re
just trying to will it and figure out why it should go down, why
it’s got to work out, and why they’re right. And through sheer
willpower they think it’s going to work out for them.

Instead the mentality that works is, to know when you’re wrong,
and understand there’s nobody who can be right 100% of the time.
As soon as you’re wrong, and you get to a point that has exceeded
your expectation of what should happen, then you need to do
something about it.

This is one of the reasons I love to trade options; I don’t always

have to close the position. For my psychology that works great,
because I still get to hang on to my idea. Using options I can take
other approaches to defend myself, by bringing in a different
trade that can enhance the position, without closing the original
one.

So that’s why I believe most traders never make it – they bring

success from other areas of their life and try to apply it to the
market, but the market doesn’t play by the same rules.

[Link] 33

Aaron’s take:

• Being ‘smarter’ than the average person isn’t a prerequisite

for profitable trading, and neither is success in other areas
of your life. Truth be told, these two factors often attribute
to new traders being overly confident, only to be humbled by
the almighty force of the market. The market is a beast of it’s
own, which commands respect.

• Having the stubbornness and willpower to hold on to a losing

trade is a sure-fire way to damage your account. Know where
you’re getting out before you get in.

• The worst thing that can happen to you, is you profit from
breaking your rules, because this means you’ll be more
inclined to do it again. Then before you know it, you’re trading
without a plan and every decision is based off of a gut feeling.

Brian Shannon
Swing trader · Author of TA Using Multiple Timeframes · Founder of AlphaTrends

What’s the reason why most traders never succeed?
@AlphaTrends

Besides the fact you have to have capital to start, there’s no

barrier to getting involved. You can start out as a day trader right
from day one, when you most probably shouldn’t. And that’s why
traders get impatient with the market. Because they don’t find
out who they are, what their personality is best suited to, and
[Link] 34

what their appropriate timeframe in the market is, until after

they’ve made too many big mistakes.

They want to get involved in the market right away, and they
see it as an opportunity to make easy money. When in fact, it’s
extremely difficult. Trading success first comes from having a
solid understanding of yourself.

“Often their Often their downfall is a combination of impatience and ego.

downfall is a When they get into a trade and see the price moving against

combination them, they begin pulling up news, looking for other opinions and
their ego does not allow them to take a quick loser when they
of impatience
should.
and ego.”
Even though they went into the trade with a plan and said, “I’m
BRIAN SHANNON
going to cut my loss here,” their ego gets in the way and says,
“no, just buy a little more, it’s definitely going to bounce.” All
along, they’re compounding their problems.

So the reason why the majority fail comes down to, not
understanding their appropriate timeframe and being impatient.
Also, not learning the mechanics of how the market actually
trades, and not understanding the psychology of money flow
before they start the sizing up positions.

Aaron’s take:

• Slow down, prepare. Many people come to trading and want

to dive in right away, without taking the time to investigate
which approach, timeframe, and market may be suitable for
them. It’s only after they get seriously hurt, do they stand
[Link] 35

back and look at what went wrong – which was essentially a

lack of preparation.

• Ignoring the psychological reasons that motivate buyers and

sellers at certain levels, may lead to unnecessary losses. By
understanding markets on a deeper level (beyond price) you’ll
be able to better anticipate future movements.

Howard Lindzon
Trader · Investor · Hedge fund manager · Angel investor · Co-founder of StockTwits

What’s the reason why most traders never succeed?
@HowardLindzon

They don’t have the right mentorship, so they just give up.

Learning to trade and invest is a long process, and often people

are deterred by a really bad experience along the way. Plus this
is not for everybody. But most people give up because they can’t
find a mentor, or they caught during the years of a bear market.

Also the media drums into people that you cannot beat the
market. While I agree it’s not easy to beat the market, I don’t
think ‘beating the market’ should even be in your vocabulary – it
should be about ‘destroying the market’!

If you’re going to trade, why would you do this to earn 12% a year
when the S&P is 9% a year? I do this because I want to have years
of 80-100% returns, or greater.
[Link] 36

So most traders give up because they have the wrong expectations,

and started for the wrong reasons – that’s the main problem. But
“Most traders they also give up due to having the wrong framework for getting
give up started.

because they
Most of the time you can solve these problems now that you
have the wrong have podcasts etc, with people telling you the truth about their
expectations, own experiences, which you can learn from. This type of media
and started wasn’t as easily accessible in 1990 when I started, but now there
for the wrong is no excuse not to dig into a few podcasts, or try a few financial
sites and see if you can find a mentor through these channels.
reasons.”

And expectation wise, the same thing…

HOWARD LINDZON

I would say to anybody, “What is your expectation?” If they just

want to earn more than cash, well they should dollar cost average
in a low cost ETF. But when a trader says, “You know, I think I
can make 80% a year.” Then I say, “Expect to lose and have years
when you are down 40%. But if you’re willing to ride them out,
then you should get in, start learning and find a strategy that fits
your risk profile.”

Aaron’s take:

• Many traders give up because they struggle to find the

mentorship that’s required. But with the advances in
technology and the Internet opening windows of opportunity,
everyone now has some degree of access to successful traders.
However, if you refuse to take advantage of this – then
it’s wasted. So put yourself out there, and begin forming
relationships with those who can help you improve.
[Link] 37

• Having clear expectations about what you aim to achieve

from participating in the markets, will help you to build the
necessary framework to get there.

Peter Brandt
Legendary trader · Classical chartist · Author: Diary of a Professional Commodity Trader

What’s the reason why most traders never succeed?
@PeterLBrandt

They are afraid to lose – that’s the number one reason. I see so
many traders who are afraid to put on a position, because they’re
worried about being wrong.

Whereas I don’t have a problem with being wrong on a trade. In

fact, I naturally assume that I will be wrong on a trade – that’s
my default position... And because of this, I approach money
management differently.

“I naturally The second reason, is they trade too big.

assume
They oversize their positions, they trade too much, and they’re
that I will be
too aggressive; trying to build up a position that’s larger than
wrong on a their account can support. This is particularly true in futures
trade – that’s and forex. Not so much in stocks with a cash or margin account,
my default because you’re reined in based on what your capital is, and you
position...” soon run out of buying power. Where as this is not the case in
futures and forex, but even still, seldom do I have more than 15%
of my capital committed to margin.
[Link] 38

The problem is, novice traders come into the futures markets
and they say, “My goodness, the margin on one contract of beans
is $3,000 and I have $30,000 in my account, I think I’ll buy 10
contracts.” Well, I buy one contract of beans for every $100,000
in my account, or 10 per $1,000,000. When I tell them this, they’re
shocked at how small I trade. So I believe a mistake that many
aspiring futures traders make, is trading way too large.

Aaron’s take:

• As a trader, you’ll need to get accustomed with the fact that

you are often wrong. If you have a fear of pulling the trigger
because you want to avoid being wrong, then there’s likely an
underlying issue. Maybe you’re trading too large...

• Just because there is an insane amount of leverage being

offered to you, doesn’t mean you should take it. Leverage is a
double edged sword, and you must treat it with caution.

And this brings us to the close...

Like I mentioned at the very beginning, I believe there are huge

benefits to understanding WHY most traders never succeed.
While I know this topic may be considered as somewhat of a
buzzkill, having now completed the guide you must admit; these
are the pitfalls that more traders need to be made aware of, if
they wish to succeed.
[Link] 39

For that reason, I congratulate you on making it all the way

through, and taking another step forward to improve your
trading. The ultimate goal of creating this guide was to help you
become more self-aware of your own trading habits, and to serve
as a valuable resource that you can easily reflect on from time to
time. I hope it serves you well.

If you have any questions, comments or queries I encourage

you to email me at aaron@[Link], or tweet me at
@chatwithtraders.

Now go out there and crush it!

Aaron Fifield
Chat With Traders
Listen to the full interviews
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Adam Grimes: [Link]/ep-021-adam-grimes

Mike Bellafiore: [Link]/ep-022-mike-bellafiore

David Bush: [Link]/ep-023-david-bush

Ivaylo Ivanhoff: [Link]/ep-024-ivanhoff

Brad Jelinek: [Link]/ep-026-brad-jelinek

Andrew Falde: [Link]/ep-028-andrew-falde

Brian Shannon: [Link]/ep-029-brian-shannon

Howard Lindzon: [Link]/ep-035-howard-lindzon

Peter Brandt: [Link]/ep-036-peter-brandt

...

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