How Successful Traders Fall?

Gravity LostSometimes finding out how to become successful is a great way to learn but, more often than not, you can also gain a lot from people who have failed in the past. By doing that, you learn the lessons they learnt but without having to go through the pain.

With that, I’m going to talk about the lessons I’ve learnt from successful entrepreneurs and business people who have failed in the past and apply them in the trading environment. Believe it or not, there are plenty of similarities amongst these professions because, more than anything, retail or private traders are running a business too.

Anyway, the following is a 5 stage process that could cause traders to fail.

Stage 1: Forgetting the Root Cause of Success

When traders become successful, they start feeling invincible and that could lead to being over-confidence. This is an Achilles’ Heel for traders because feeling good about your trading results is fine but feeling extremely over whelmed about it isn’t.

I have spoken about this in several of my articles and the key to trading success is consistency (of the process) and your trading results is actually less relevant. Unfortunately, whether you like it or not, when non-traders ask about your trading, they don’t ask about your process. Instead they always ask about your results.

Can you see why it is challenging to not focus on the results (as oppose to only focusing on the process)? And this is precisely the problem. Traders forget that their success and profitable results, to a certain extend, is based on luck. They could have kept to their rules and followed rigidly to their system and they could still have a losing month.

Once traders feel invincible and when they only focus on the results, that is when stage 1 kicks in.

Stage 2: Discipline Takes a Backseat

lazy-catA trader’s discipline is like the backbone of his/her trading success. While discipline is only a small part of the success factor, you cannot be successful without good discipline. Unfortunately for some, if you’re sitting in stage 1 (without realising it), the chances are high that you’ll start sipping into stage 2 – the feeling of being invincible fuels the potential to slack. In other words, your discipline will take a backseat and your trading routine starts to fall apart.

When your discipline starts to weaken, you start to ignore minor routines that you have. For example, instead of being at the charts on time, you procrastinate a little. Sometimes you miss a few trades and that doesn’t bother you. You think entering a trade slightly later won’t matter because you assume you’re going to win any way.

Discipline is like muscles that you need to maintain the performance. However, when you start slacking, you start falling behind because your muscles are not as strong as they use to be any more. And this is exactly what happens at Stage 2.

Stage 3: Risk Management Gone Wrong

So you’re now feeling invincible and your discipline is pretty shaky too. The chances are, you’ll start noticing your trading results as well. By that, I mean that the results are slipping and that’s not because you’re not profitable any more but because they aren’t as profitable as it used to be.

Reduced in profitability is not surprising at all if your trade entries are not as precise as they used to be (thanks to the slacks mentioned in stage 2). BUT… you don’t seem to realise it because you are still feeling invincible about your trading. You assumption is that nothing much has changed and, even if has, you don’t realise it.

Considering the fact that you profits have fallen and your confidence has not, the only other way to increase profits would be to up your risk. This seems like a sound solution because you believe your system is still consistent and increasing your risk should not affect the outcome of the system.

Of course, we all know that increasing your risk with a rotten trading routine can only lead to one direction – multiple losses. Unfortunately, given your state of mind, you as the trader would find it difficult to believe.

Stage 4: Running for Survival

As you should know by now that risk management is a crucial part of trading. In general, increasing your risk per trade is fine but only if you have a solid trading plan and if you are following it diligently.


As soon as your trading deteriorates and you choose to increase your risk to help recover your losses, that’s when you’re destined to lose a lot of money. Traders who reached that situation are now in stage 4 and they struggle to recover on their own. They are running for survival and these traders will try everything that they can to recover and to get back on track.

Of course, their confidence level is far from where it used to be and many negative emotions have now clouded their minds. They can’t seem to figure out the problem but worse than that, their ego and pride forbids them from external help. They get frustrated easily and they just dive deeper into the problem. More often than not, the solution is just in front of them but given the situation, many struggle to take a breather and they fail to look at the bigger picture.

Stage 4 is now at full throttle.

Stage 5: Do or Die

In stage 5, which is the simplest of all the stages, is when the trader would usually take the following option:

  • Give up – they completely give up and stop trading.
  • Blow up – they blow up all their money from trading.
  • Stand up – they realise their problems and they seek professional help.

If you’re reading this and you’re struggling with trading, I hope you’ll pick the last option.


The process above is not the ultimate recipe for disaster. However, many traders as well as business people have fallen because of some of the issues mentioned above.

While the processed above goes in stages, it is absolutely possible to move from one stage to another so rapidly that you just skipped it. For example, some traders could have gone Stage 2 directly to Stage 4 because they started to slack in their risk strategy. Another potential is that some could have gone from Stage 3 to Stage 5 as they emptied their trading account with one or two trades. Also, some traders move from one stage to another very slowly. They could be stuck in Stage 2 for years because they are constantly breaking even. They maintain good risk management but not progressing.

With that, I hope this article could highlight some of the issues that could arise along the way. Be on your guards and stay focus, hopefully you don’t have to go through any of them.

And in the mean time, what I’d like you to do is leave a comment letting me know about the problems you’ve had in trading and becoming profitable. It’ll also be great if you can share other of your experiences here.

Thank you and have a good day!



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