Why Do Retail Traders Fail?

Good question right? Why do most retail traders suck at this that even try it? But, there’s a better question: why do most people just fail in general at running a business?

Trading and running are business are one and the same - literally.

So, let’s end this narrative of “why traders fail” - most fail because they have zero business running a business, trading as a business included.

Sure, some of it is strategy and a a lot of it is a lack of knowledge but most of those things can be solved.

There are two reasons why I believe this is.

Maybe you’ll find inspiration in this, or have it spark a thought or maybe even an unsubscribe - whatever it is here are my thoughts.

1. They don’t understand how to run a business

You can look at any quality investor (even the ones that don’t spend time on TradingView drawing lines all week) and they're usually smart and good at business in general.

Most entrepreneurs that run successful companies, they can trade and do well.

There’s not a single person I know (even passive investors) who cannot do well investing that don’t also own companies or interest in them.

Why? Because they understand business. They just “get it” and you cannot teach that.

It’s the same thing with first time small business owners - they will screw it up a few times before they find they’re footing and it’s usually the 3rd/4th go around if they’re smart where the mistakes end.

But, most Retail Traders have never been in a position to run a business so you can give them all the tools in the world and they won’t have either a) the process to apply it or b) the innate drive to do it.

I’ve had friends around me for years who wanted to try this but they’re just not driven to make money - they’ll say they are but they’re not.

And you cannot teach that. - And let me be clear, there’s no shame in that.

The last 4 days I looked over a really old HVAC business - and like most small companies, they had skeletons in the company and balance sheet.

You could see it instantly - from a lack of process to marketing to execution on the things that are driving revenue. (hence that Tweet above) after leaving a meeting on it.

And that’s what most Retail Traders lack - the ability to manage money, allocate it efficiently and to actually have a framework, the last one being most very important.

It doesn’t matter if it’s trading or an HVAC company - if you can’t asses risk, learn to see the chess board properly or learn to implement a framework then execute you’re going to fail.

So let’s really just stop with this narrative that trading is the hardest thing ever - it’s no harder than running any company but it gets harder when you’re a putz.

1. Most simply just do not listen. This is the easiest thing to do: pay attention. You can have $20 and the cheapest thing you can do is to pay attention. I had someone recently take the FFT - it lays out entirely what to do to scalp support/resistance ( a very simple concept) to pass a prop firm evaluation. Yet, instead of doing what the framework said they’ll do the opposite.

And to be clear, that' happens all the time or it would not have made this blog as the the second reason. Coming up in this business I was lucky enough to sit on an actual trade desk as a career so I was forced to pay attention and start really listening. For most of you, the conversations you have on a daily basis are generally just bullshit so you tune out most of what is said as such: bullshit.

So, I get the idea that listening with intent is a rare thing anymore because of the drivel that occurs - but if you just listen, pay attention and go execute you’ll find that a majority of this gets easier.

Some of you have heard this story, so I’ll keep it brief. A few years ago I took a younger trader under my wing to mentor him on life, business and some issues he was facing personally.

At the time he was trading and I showed him a very simple options strategy to scalp a static set of names. Gave him a risk model….all of it. And instead of listening he went and lost $4,000 to which took months later to admit to me.

One, he just didn’t listen - that’s the easiest thing you can do.

Two, he had no experience in running a business or thinking about money rationally.

You can get away with not listening to me or anyone if you have any history of general business/operations skills but you can’t not have both, so, pick a struggle bus.

Losing happens and it’s expected but losing because of silly mistakes or not listening is different than losing because of something that was just not factored in.

So hear me when I say this - pay attention.

That in itself leads to better results, whether it’s trading, driving in rush hour or running any business.

Wrapping it up….

Late night post for me but after finishing this last due diligence on this Company (and passing tonight) this all came to my mind and sometimes it’s best to just write in hopes that it helps some of you that read this blog.

Dan

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