A newer and struggling trader asked me a great question in an email this week:
“Wayne, how much does LUCK play into Day Trading? I feel like I’m the unluckiest trader on the planet! I always seem to pick the wrong trade. I always seem to stop out just to see the stock run right after I’m out. I always seem to be late into a trade, even if I’m already watching it. I could go on and on but I think you get the idea… Please let me know your thoughts on this.”
Not surprisingly, I do have a few of thoughts on this! I shared my thoughts with this trader and we agreed to share with everyone.
For a brief time on my path to profitability, I felt the exact same way. I experienced all the “unlucky” things this trader is experiencing and more. Here are 5 “unlucky” scenarios I used to get frustrated with:
A stock would come down hit my stop to the penny AND THEN RUN without me…
I would be deciding between trading XYZ and ABC. I took XYZ. It didn’t work. ABC ran $2 without me…
I see EFG setting up but I talk myself out of it for no good reason. It runs over $1…
The very next trade (I’m not going to talk myself out of another trade!), it fails almost instantly.
I’m following GSP but I miss and/or didn’t take his first 2 calls. He calls a third and I’m all in! It’s the ONE call of his that failed that day, and the only one I took.
Anything like this happen to you? Things like these happen to all traders from time to time, especially on our paths to profitability. They seem to happen to some more traders more than others and that’s where "luck" comes in.
So, what’s the answer? Does luck play a roll or not? Did I experience those 5 scenarios because I was just unlucky or was it something else?
Let’s get to the answer already:
YES, luck does plays a role in Day Trading. But it’s a very tiny role in my opinion. I didn't experinece those five (5) scenarios because I was unlucky. It certainly felt like that from time to time, but luck (or lack of) wasn’t the answer for me. And I highly doubt it’s the answer for you.
If you’re losing money and aren’t consistently profitable, it isn’t because you’re unlucky. Sorry, I know some of you don’t want to hear this. However, if you don’t agree with me then I’ll tell you this so hopefully you'll keep reading: There is an easy way to increase your luck and that’s what struggling traders should be focusing on!
Ready for this? You may not like it either…
How does a struggling trader increase his/her luck? Work harder. Study more. I’m a big believer that the harder you work, the “luckier” you will become. That was certainly the case for me.
Let’s look at this another way: Day Trading is hard. You hear the stat all the time that 95% of people who attempt to Day Trade for a living fail. What you don’t hear a lot about is WHY so many of these traders fail. No one likes to talk about that!
The allure of Day Trading is intoxicating: Being your own boss. Working from home. No commute. Not having to deal with co-workers and/or customers. No office politics. No getting dressed up for work. The positives are endless…
But most people who attempt to trade quickly realize it’s A LOT harder than they ever imagined it would be. And harder in different ways – YES, it is all about the psychology! Trading for a living is a full-time job that happens to be much harder, riskier and a whole lot more stressful.
So why (in my humble opinion) do most people not succeed? Are they just not lucky enough?
It's NOT luck. Most people don’t try hard enough. Most people don’t work at it enough. They don’t study. They don’t read books. The don’t read blogs. They don't take the time to watch a webinar. They don’t seek out a mentor and ask question after question after question trying to learn from someone else’s experiences. They don’t track their trades (so they have NO IDEA of why they are failing). They haven’t taken a class. They don’t have set-ups. They don’t have a process. They certainly don’t have an edge. They don’t stay disciplined. They don’t spend enough time staring at their screens and learning from what they are seeing. They blame others, bad luck and everything else except themselves for their struggles.
I’ll put this another way. EVERY successful person I know (regardless of their profession) works their butt off. They put in long hours. They eat, sleep and breathe their jobs. They WORK. They grind. They do whatever it takes to be successful and they don’t give up and throw in the towel when things don’t go their way. They certainly don’t blame anyone else for anything. They work hard at it day in and day out. Trading is the exact same way, only harder.
What do most struggling traders do instead? They just wing it! They show up for work and hope they are going to be luckier today than they were yesterday. Even though they did nothing between today and yesterday to improve their luck. And they'll probably do nothing after today...
Most people don’t want to hear this but It takes YEARS of learning, studying, planning and staying disciplined. It takes screen time. And most of that screen time is spent watching, not trading. It’s a grind. Most of the time it’s boring and it should be. Controlling the highs and lows of your emotions is a HUGE obstacle that gets in most people’s way.
Remember, if trading was easy, EVERYONE would do it.
So, let’s get back to the luck discussion. The reason I say the harder you work, the “luckier” you get is this: It’s not actually luck. It’s your hard work paying off! Remember, my 5 “unlucky" scenarios above? Here’s how hard work changes those for you:
You don’t get stopped out in a trade only to see it run without you. Instead, you’ve learned how to read Level2 and not get faked out.
You gain confidence in your trading and your set-ups so you take BOTH trades in ZYX and ABC.
You don’t talk yourself out of EFG because you have the confidence in the trade and you know it’s a winning set-up. Your rules tell you to take every trade that set-ups and meets all your parameters.
You don’t even take the next trade because you already took the first one and you know FOMO and chasing is what kills most traders.
You’re no longer “just following” GSP. You’re still in his chatroom every day since it is the best trading chat room on the planet after all! But you’re seeing the trades set-up as he is seeing them set-up. You’re not waiting for confirmation from anyone to take any trade.
See, it’s not luck at all… It’s experience, dedication and hard work.
Still think you’re not profitable because you just aren’t lucky enough? The trader who emailed me doesn’t think like that any longer. He’s back to work and studying. Something tells me his luck is sure to improve.