What's Stopping People From Making Money Trading? The Reality.

Since the beginning of online trading via leveraged funds/brokers, there has been a mass of both studies and theories as to why people nearly always end up losing money on investments and/or Trading.

My experience is quite unique, because I have seen a reasonable amount of people make a lot of money, and also lose a lot of money. 

I also have a different perspective from my years studying / teaching betting markets and how to defeat them with value and variance models. I now currently incorporate a lot of this knowledge into my own trading and teaching on a daily basis.

Leveraged Trading via a financial services broker or any other means is necessary because the average Trader does not have access to enormous amounts of capital. Since moves in markets like FX are relatively small in actual terms, leveraged trading is necessary and becomes a viable service.

All Brokers know that Traders who sign up continually will lose money. Their job is not to defend them from this but rather encourage them to deposit and trade because it creates a business for them, mostly, as entertainment rather than a means of actually making income.

Trading therefore, for many, is entertainment. It is not a serious means of making money and these Traders will always end up losing their money ultimately. The longer they trade, the more they are just going down a sinking hole. These Traders are ubiquitous.

So why is it that the average Trader cannot easily make money in the Markets?

It comes down to this, and this only - Probability and Variance.

From my years teaching value betting globally, I know very well that any scenario you picture will have both a probability and a variance structure.

The probability aspect, is simply the chance of success on that occasion. High probability trades are likely to hit your take profit, and the opposite is true for low probability trades. Trades change their probability almost always based on how close your take profit and stop loss levels are placed. 

The variance aspect considers how frequent something is going to occur and is linked to the probability. For example, trades with far away take profits will end up in large gains. Similarly, trades with high risk will end up causing big losses.

The problem for Traders in general, is that they cannot survive the swings of high profit and high loss. At some point, down the road, they will end up losing everything simply by Mathematical fact. It is not a case of being 'clued up', it is simply having a repeatable edge and some money management. 

Using my experience in the value betting industry, where I've made six figures already from my own betting, I always stake money when;

A) My bet has a profitable edge because the value is too high for the chance of the event occuring (I'm paid out more than the reflective/implied probability of the bet winning).

B) My stake on that bet is low enough to protect me from busting and losing my entire equity, should I lose consecutively even though each bet has an edge.

This means that although I will experience times of loss continually, it will NOT cause me to bust and my equity be diminished. It does not matter what happens in this case, I will always make money in the long run.

Applying the same theory to Trading, there will be times where you have consecutive losses between periods of high gains. If you can last these moments and ride them out, before returning to an overall up-trending profit trajectory, you will make money.

If, like most, you start to vary your entry sizes randomly, or on what you think are 'golden' trades to take, you will inevitably have an unavoidable patch of losses which cause you to experience a margin call. It does not matter have probable any given setup is, you will always experience swings of loss. It is naturally unavoidable.

Once you accept this fact, and start to create something that offers probability, with sizes to fit the potential swing against you at anytime, you can start to build a viable system, like the one taught at The Trading Mentor Academy.