lystn

Hey everyone, Kirk here again and welcome back to the daily call. On today’s call, I wanted to talk about why only 10% of options traders are actually successful and why I think 90% fail. I’ll start this out by saying that they don’t know where. These stats are just honestly pulled out of thin air because we hear all the time that people say 90% of traders fail. I don’t know what the actual numbers are. I don’t anybody has actually really tracked. I don’t think you can even track what the actual stock numbers are. But it’s probably safe to assume most businesses, most ventures that 90% or at least 90% of people actually fail trading options. I wanted to cover what I think… I just sat down this morning with my coffee and thought probably about six things or so that I think really are the main culprits if you will about why people fail trading and really don't find success, so I want to cover these with you guys here today. I think number one is just consistency. I think it has to be said that the biggest reason for sure (and this is something that I know for sure on my end because we see this all the time) is consistency. People understand the system, they probably get it. If you’re listening to this podcast now and you’ve seen some of our videos, you probably understand or have started to understand some of the concepts around trading, why we do it, the numbers behind it. But it just comes down to consistency and it really becomes very similar to how people try to lose weight or become physically fit. They have a lot of high motivation, a lot of energy heading into like the New Year for example. Maybe you guys just have this getting into the New Year. What happens is that there’s a lot of energy, but then it fizzles out. You don’t keep that consistency, you don’t keep that motivation level high, that energy level high and it just fades. There’s nothing else to say about it. I mean, it’s all happened to us before. We’ve all maybe started a diet or a workout routine or a program and for one reason or another, it fades. That doesn’t mean that the program is bad. It doesn't mean that running is bad if you stop running. I don’t see a lot of people online saying, “Oh my God! Running is so terrible for you!” But a lot of people stop running. They try to run or want to get into a habit of running and then they just don’t. I think consistency is a big one. I think you have to find a routine and a habit. We talked about this I think in previous podcasts, but the important part about developing a consistent routine is to develop a habit, to figure out what you need to do to get a habit in place. It’s going to take a lot of work to get that habit initially started, but once it’s started, your brain will take over and it’ll be a subconscious activity. Number two is I don’t think it… The way I say this now is like – It doesn't hurt bad enough and that’s really what it comes down to. If you’re not going to make a significant change in your life and the way that you invest and the way that you handle your finances until something hurts bad enough in your life to make you want to change… It’s just how we are hardwired as creatures. We’re not going to cause ourselves undue stress or undue pain. That’s why we see people all the time that are up against debilitating disease or up against death and then they start doing all these things. Well, they’ve could’ve done all this stuff before. But it doesn’t hurt bad enough. There’s no sting of financial hardship or something, a job loss, a loved one dying, a hardship in the family. There’s got to be some sort of catalyst that you have to attach your wagon to if you want to make this successful. There’s got to be some sort of emotional play on this end. We’ll talk about emotional later on. But emotional play on this end that you work hard enough to actually do something about your financial situation and learn how to trade options, etcetera. Number three is position size. Undoubtedly, another major component to how people fail is that they just have too big of a position size. I call it “the rodeo cowboy syndrome.” They go into the markets like they’re riding this Bucking Bronco and they’re throwing around money left and right and just swinging things around. They have no idea what they’re doing. Position size can kill. I mean, it really can. Position size as we’ve talked about before is something that really you should look at as your friend. A small position can help you. It's what you need. It’s how the numbers and the math works out, is with small position sizes and high trade frequency, so make sure that you’re keeping your position size small. Number four is directional assumptions. I've often talked about the fact that we have really bad inclinations about where markets go on a consistent basis. That doesn’t mean that we couldn’t be right here and there. But more often than not, I am definitely not a good directional trader and I recognize that. I think probably everyone else is. Sure, do I have times where yeah, I pick that top or I pick that bottom or I knew that thing was going to go higher, but more often, we are really bad directional traders, so why start trading directional. Please don’t trade directional. If you make a directional bet in one direction, fine, but just make the opposing bet someplace else. If you’re going to trade something long, trade something short. Be more neutral than directional. Number five is the “emotionally fighting back syndrome.” This is something that I think actually hurts you when you actually fight back against the market. What I’m talking about is having some sort of emotion tied to the market, meaning you are mad at the market subconsciously, you're happy with the market subconsciously. It could be in either direction. It doesn’t really have to be always that you’re mad and fighting back. But we see oftentimes people let their trades go too long, they get greedy. They do things they shouldn't do when they’re fearful and they sell to early or use a stop loss. But having some sort of emotional fight back against the market and assuming that this market is this person out there, this thing that you’re trying to fight against is totally the wrong way to go about it, so try to be as unemotional as humanly possible I guess which is hard to do. That's why the advent of trading systems and software is obviously going to really take hold in the next couple of years because I think as humans, we’re really bad at making decisions and that hopefully removes that emotional aspect out of it. And then number six, the last one is just frankly that most people acknowledge. I always say that it's not that you have to know everything about trading. It’s just that you have to know the right things about trading. I often relate this to cars. My dad is a master mechanic and was for many years for Nissan. He could literally rip a car apart, bolt to bolt, everything laying on the floor and put it back together. I can’t do that, but that doesn’t mean that I don’t know enough about a car to actually use it, to get the car from point A to point B, do everything I need to do in a car. I don’t need to know about every single nut and bolt. Now, I’m not saying you do either about options trading. I think you need to learn the big rocks, the things that are really, really important. And then from there, if you want to dig into actually how the Black Scholes formula is calculated and hand calculated, I mean, by all means, go ahead. But you don’t need to know that stuff to be successful. Figure out what gaps you have in your knowledge and start filling those gaps as quickly as possible. Hopefully this helps out. As always, hopefully you guys enjoy these daily calls. If you have any questions, let me know. Until next time, happy trading!