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3 Uncomfortable Trading Truths

They say 95% of new traders fail and quit before they become profitable.

It’s an impossible statistic to prove. But this number feels accurate. I think it’s safe to assume less than one out of every 10 novice traders survives his first big losing streak.

Why is the market eating most new traders alive?

The truth is most newbies can’t handle the mental aspects of the trading game. If you have a few spare dollars tucked away, you probably think you’re doing something right. You’ve found some level of success in the business world. You’ve even bought some winning investments. Expanding your profits with short-term trading is just the next logical step.

But when that first wave of losses rolls in, you fold. You weren’t ready to tame your emotions. Instead, fear and greed ripped you apart.

Today, I want to help you transform your thought process and become one of the rare traders that breaks through to consistent profitability.

It all begins with learning some of the key uncomfortable truths of trading. If you can embrace these ideas, you just might have a shot at dancing with the big boys…

Here are three uncomfortable truths about trading, explained:

1. You’re going to be wrong… a lot

It doesn’t matter if you’ve been trading ten years or ten minutes. If you’re playing the market, you’re going to hit a losing streak. It’s unavoidable.

But many new traders are blinded by unrealistic expectations. They’re obsessed with being right instead of making money. So instead of selling their losers, they let ‘em ride. You can probably guess what happens next.

The first step on the road to trading success is embracing your losers. Acknowledge when you’re wrong, sell when your stops are hit, and move on. There are plenty of professional traders out there who boast win rates of 50%– or less! They’re staying consistently profitable by cutting losses early and letting the market work its magic.

2. You have to ignore the bulls and bears

The financial media loves to present the game of investing as a death match between the bulls and bears. Whenever an analyst pops up on the TV, the hosts will try to pigeon hole him into the bull or bear camp.

But the most successful traders in the world don’t give a damn about bulls or bears. Instead, they’re comfortable adapting to changes in market conditions.

If you’re prepared for anything, you’re less likely to fall victim to any preconceived bias. It’s all too easy to convince yourself that a move higher or lower is a foregone conclusion. Before you know it, you’ll end up trolling for other opinions that match your own. And once you enter this echo chamber, it’s difficult to reverse course.

Adopting a neutral market mindset can be beneficial– especially in this market. If you’re not married to a particular camp, you can quickly react to changes in direction.

Stay nimble and listen to the market. Leave the bull and bear soap opera to the talking heads on TV…

3. You must let price lead your trading decisions—not narratives

Successful traders have to go against the grain. That means you’ll sometimes find yourself betting against some of the market’s most popular ideas.

That’s how you know you’re onto something good.

I know the so-called experts are going to initially pan my best trading ideas. That’s because price leads the news. You’ll find most of your strongest trading opportunities are the quiet breakouts that everyone hates. But when all is said and done, you made money while the herd was stuck on an old narrative.

There’s a lot of noise out there. Do you have the discipline to ignore it? Many folks don’t. They get caught up in rumors, guesses and hot tips. Don’t make that mistake. It never ends well…

If you’ve been with me for some time, you know we spend a lot of time discussing our trading rules during these Monday strategy sessions.

You already understand that sloppy, undisciplined trading will cost you money. Sure, you might get lucky now and again. But you’ll never achieve consistent success shooting from the hip. Your trading rules keep you focused and profitable. If you’re reckless and break the fundamental rules of trading, you’ll end up broke. It’s that simple.

Now you can add these uncomfortable trading truths to your list. Embracing the chaos of the markets just got a little easier…


Greg Guenthner
for The Daily Reckoning

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“Whatever it Takes”

And so it was what it was – the market began the day lower – reacting to the weak OECD headline for one and then anxious over what the FED was going to do… would they surprise the markets or not? So as the clocked ticked closer to 2 p.m. you could feel the excitement building as all the talking heads opined on what we were going to hear… and then BANG… it hit the tape – the FED was set leave rates unchanged… stocks began to celebrate but fell short of a real party as they waited patiently for the press conference…

Greg Guenthner

Greg Guenthner, CMT, is the editor of Opening Bell Fortunes and Seven Figure Signals. He has been with Agora Financial/Seven Figure Publishing since 2005. In 2019, the average position in Greg’s Sunrise Fortunes portfolio outperformed the S&P 500 by 1.65x.

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