What separates the 10% that make money from the 90% that don’t?

By | June 20, 2014 4:15 pm
Must read for every kind of trader. Enjoy your weekend!

What separates the 10% that make money from the 90% that don’t?

10,000 hours.

The key to success in any cognitively complex field is, to a large extent, a matter of practicing a specific task for a total of around 10,000 hours. 10,000 hours equates to around 4hrs a day for 10 years. For some reason most people that ‘try their hand’ at trading view it as a get rich quick scheme. That in a very short space of time, they will be able to turn 500000 into 10 Lakhs! It is precisely this mindset due to which most of traders fail !!

The greatest traders understand that trading much like being a doctor, engineer or any other focused and technical endeavor requires time to develop and hone the skill set. Now you wouldn’t see a doctor performing open heart surgery after 3 months on a surgery simulator. Why would trading as a technical undertaking require less time?

Trading success, comes from screen time and experience, you have to put the hours in!

Education, education, education.

The old cliché touted by politicians when they can’t think of anything clever to say to their audience. The importance of education to success in trading cannot be placed on a high enough pedestal. You have to learn to earn, the best traders work obsessively to refine their edge further to stay ahead of the curve.

Think for yourself.

“NO! NO! NO!”… “Do not Sell Real Estate Stocks, Market will go Higher”…”Don’t move your money from Stocks ! That’s just silly! Don’t be silly!”

A quote from well known stock guru SP Tulsian aired on CNBC days before 2008 crash, Many traders/investor  lost 90% of its value. Many followed this call and felt the obvious pain as a result. As the old saying goes, “too many cooks spoil the broth” it is very much the same in trading. Successful traders blinker themselves from the opinions of others; they focus on their own analysis of fundamental and technical information.

Adapt or Die.

Market conditions change and technology advances, thus the conditions for trading are always evolving, the rise in mechanical trading is testament to that. The very best traders through a process of education and adaptation are constantly staying ahead of the curve and creating ever new and ingenious methods to profit from the markets evolution.

Fail to plan, you plan to fail.

The best traders have a well documented plan; they know exactly what they are looking for and follow that plan to the letter. Their preparation for a trade starts long before the market open, it is this meticulous planning and importantly adherence to that plan that helps them avoid the biggest demons for any trader, over trading and revenge trading.

“Be like Machine”

As human beings emotions pay a key role in our existence, for a trader emotions can be a source of great pain. Trading psychology and the management of your emotions in a trade play a key role in overall success. Fear and greed can cut your winners short and let your losers run. Dealing with emotions follows on from your plan; the more robust your plan the less likely you are to fall into the emotional mine field.

Know your tools

Every trader has a set of tools they use, DOM, Charts, News feeds etc. These tools are a traders bread and butter; they are the most vital part of a traders arsenal, without which it would be impossible to trade. The best traders have mastered their order entry methodology, they know all about the features they need from their charts. This mastery of their tools, allows the trader to get the very best out of the resources they have available to them and ensures perfect execution of their trading ideas.

Know Thyself

Behind all the egos and excess, the best traders know their limitations; they focus on what can go wrong in a trade, and expend a lot of energy in limiting and controlling their risk before thinking about profits. They have a heightened sense of self-awareness and focus on incremental self improvement.

Profit & Loss

The best traders focus on the trade itself rather than the P&L; they view each trade as a technical exercise and focus on getting the most out of the market in accordance with their plan. They do not think in terms of the grocery payment, the electric bill and the desire to make X amount to cover a loan payment. Focusing on the money behind a trade can cloud technical objectivity.

In Conclusion

The greatest traders work hard to get ahead and even harder to stay ahead. Through increased and niche knowledge they constantly adapt with the market and remain profitable in every environment. Drive, tenacity and the will to succeed is the greatest edge of every successful trader.

10 thoughts on “What separates the 10% that make money from the 90% that don’t?

  1. Pravin Kolhatkar

    How to develop a trading system ?
    coz every system dosent work in all markets I mean bullish , berish n sideways

  2. ramanathan


    Please let me know what is DOM, which you have mentioned in “Know your tools”

    Cheers, Ram

  3. Aravinda Ramachandra

    Dear ramesh, I have been reading your analysis since quite some tim mostlye and I must say mmade money mostly and lost some when my emotions played a vital role over trading psychology.i would love to see if you of fer any trainings.

    Appreciate your inputs.



  4. DrRajan

    Sir, As usual this is one among the many of the Best Articles from your desk. My view is those who read this and imlplement can benefit multifold.


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