90 90 90 Rule
There are many stock phrases in the world of trading. One of them is the 90 90 90 Rule. That is 90% of new traders will lose 90% of their money in 90 days. I have been fortunate enough to survive the 90 days. There was of course a heavy toll on my account. The draw down is often referred to as tuition.
I have to admit that I was first drawn to trading because of the money. Also, the idea of freedom. Trade for a couple of hours in the morning and then move on to my next project of the day. There was a shift of my passion from money to my passion of mastery of the three pillars of trading. Analysis, Money management and mind. When that shift of attitude happened, I remember thinking that nothing matters to me any more than mastering trading.
You have to have an absolute passion for trading. What does that passion look like? Constant study of the markets, chart analysis, understanding indicators, money control and knowing oneself. No wonder so many fail. The psychology alone is daunting. I had no idea how I ticked until I entered the arena of trading. First there was the discovery that I had a mind problem. Then there is the journey to correct the problem. I am a better person now because of what I have learned about myself.
My advice to the new trader is, you are a statistic. You will lose. In fact, if you believe otherwise, you will lose faster than average. I know this sounds harsh. I am telling you this so that I can make you a better trader from the beginning. Before you trade, test your setup in a simulator. If you found your edge then start trading with very small amount of shares. If you are thinking "I can't make a living off of small shares". You are correct, but, you also won't lose your account before you have learned the ropes.
Live to trade another day. The longer you survive, the better you become at trading. You will thank me later for trading small until you can string together 20 or longer consistent days of trading. When you do take a loss, it will be smaller than your average winning day.
See you in 91 days.
“The way you handle your losses will tell you more about your potential to become a profitable trader than any other indicator.”
― Tom Hougaard
Key Points
- Simply be aware the statistics are stacked against you when starting your trading journey. Don't let your ego or pride rob you of your money.
- Zero in on the skill of trading and not the money to be made. The money is a by product of great trading.
- Find your edge in a simulator and prove you can consistently make money month after month.