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To be very clear, the horror stories you hear about day trading have NOTHING to do with the technical chart patterns, or that trading doesn’t work, they are almost entirely down to lack of emotional discipline by not following their trading plan. This usually means (but is not limited to); not taking stop losses, risking too much money too soon, cost averaging down on LOSING positions, and not stopping when your trading plan/money management says to quit for the day.

Traders have very specific rules written in their trading plan. For example, one of the key components to my trading plan is that I am not allowed to lose more than 3 trades on any given day. This means that if I am risking $300 per trade, and I lose $900 throughout the course of the day, I must stop immediately. If I don’t stop then I am breaking the rules of my plan and endangering the favorable odds of my positive expectancy. This would be a poor example of money management, brought on by a lack of emotional discipline, which sadly is all too common in the trading world.

If you are risking $200 on a trade, and you are -$200, then you need to exit the position. However, if you let it go to -$500 or more, then you are breaking the rules of your plan. This is when trading becomes gambling.

The rules we have in our trading plan are put there for the well-being of the trader. They are non-negotiable. If you have an office job and you decide not to show up for 5 days in a row without telling your boss, there is a good chance you’ll be fired. Why? Because you didn’t fulfill the duties of the job. Trading is no different. If you don’t follow the rules of your trading plan, you will be fired. How? The market will take your money and your account will dwindle down to nothing and you will be forced to quit, aka: fired.

Any negative comment you hear about trading or likening trading to gambling is almost always related to the trader having a lack of discipline, which has nothing to do with the patterns working or not working. It’s no different than someone who dumped their entire 401k in February 2009 at the bottom of the market (after a 40% drop) then watched the market go higher for 8 straight years, and then blames it on ‘the crooks on Wall Street.’ That is simply a lack of understanding of the markets, or in our case, trading.

Common Reasons Traders Fail:

• Risk too much money too soon
• Don’t take stop losses
• Cost average down on losing positions
• Don’t have proper money management and quit when their plan suggests they should.

The reason that traders struggle with discipline is because they’ve never had to manage themselves before. They’ve always had bosses to tell them what to do and when to do it. Even people who have owned businesses before will often struggle in the begi ing of their trading career because they are not held accountable to anyone but themselves.