The failure rate of new e-mini traders is disturbing. According to various sources, 90% of all new traders are out of the market within 3 months, their trading account balances exhausted. There can be little doubt that e-mini trading presents a challenging skill set to learn and execute, but there are a number of factors that are well within the new e-mini trader's reach that he or she can control.
In my experience, a good deal of failure centers around three important factors that directly impact every new trader's career. They are:
There are a wide variety of trading systems out there from which traders can choose. Some of the programs are very large, some are famous. There is no correlation, in my thinking and experience, between popular systems that can run more than $ 7-10000 and broadly advertized and other systems which are based on sound trading methodology. I've already written several articles on finding a good trading system, so I will not disclose this article with that lengthy topic.
1. Learn the System-
If there is one thing I see over and over is new e-mini traders trading real money and have, at best, developed a very limited skill level with the material and system he or she has paid for their hard earned money. I do not just do not get that thinking, but it is a rare student who starts simulator trading with me one on one that has properly prepared themselves to trade by learning the basic information of the system that they are about to trade. They know some trades. They may know some of the interesting parts of a trading system, but they seldom know the details; And success in trading is in the details. The end result of this thinking is that I end up spending a good amount of time explaining how charts and bars work when trading, when we could have been working on the business of learning to trade, not wasting time trying to hammer out the lingo and Teaching the student material that is well documented in the written and video sections of a quality course. Poor preparation is industry wide, and I read in the forums about systems I know well, and can trade effectively on my own, being bashed by individuals who "just could not seem to get it" right and the concluded system is undesirable. I generally know what really happened. Do not study the material half-hearted and expect to learn the "meat and potato's" of the system in the trading room. Be over prepared.
I have scads of new traders and potential traders come into the room and not ask a question, just sit and listen. The most successful traders I have mentored were individuals who were fully engaged in the trading process and when the did not understand something, or some trade, they promptly asked why I am doing this and what did I see on the chart. My preference is for small trade rooms that allow the room to interact. Again, I have written an article on this subject, but when all members of the room can speak to each other, there is a mutual learning process goes on, and their interaction, in my opinion, is often more helpful than the information I may Imp. In short, when you ask questions you let people see where you need help and may get some suggestions how to remedy this or that. Communicating creates a synergy in the room that allows everyone to learn.
When a new student first starts in the trading room, they generally lack any meaningfulful e-mini trading experience. Simulators are great places to gain trading experience under the right conditions. In order for a simulator to be an effective trading tool, the new e-mini trader must trade the simulator exactly as he or she plans to trade their real money. Invariably, I notice traders trading 300 contracts on a trade, just to see how it would work. You will probably not trade 300 contracts in your life, probably not even 100 contracts; But these playful dalliances with non-reality are very damaging to the discipline and emotional control a consistently profitable e-mini trader most employ. In short, simulated trading programs are great if you trade with them exactly as you plan to trade with real money, but deviation from your specific trading mindset and methodology on the simulation is highly counterproductive.
In summary, I have stated the three most common mistakes new e-mini traders make. Some spend their money on a course, then never bother to develop some mastery of the information. Many traders sit and try to learn as "mutes," and never get the benefit of room wide interaction. And finally, it is very important to use your simulator in the proper fashion. When you are consistent on the simulator, you are ready to go to the market.