Why There’s So Much Money In Trading

Trading is so lucrative precisely because most people lose money at it.

After all, the more money the losers lose, the more money the winners make.

But hang on… why do the losing traders lose so much in the first place?

Think about it for a moment.

..

.

Ready for the answer?

Here it is…

It’s because:

Most traders think they’re OK at trading, when they’re actually bad at it.

Allow me to explain.

Why There’s No Money In Chess

Let’s assume you know nothing about chess, but suddenly developed an interest in it.

You go to the library and pick up a couple of books on the subject, and maybe register for a weekend beginners workshop.

You then spend the next few weeks practicing and start getting the hang of it.

The following month, you register for the World Chess Championship.

Two questions:

  1. How much money would you bet on yourself reaching the top 10?
  2. What’s the chance of you reaching the top 10?

For both questions, I hope, you answered “zero”.

Most Amateurs Know They Suck

You wouldn’t bet on yourself because you know you don’t stand a chance against the professionals.

That’s why there’s no money to be made in chess. The amateurs know they’re bad at it, so they don’t bet on themselves winning.

The same goes for almost all competitive arenas. Golf, tennis, poker, even e-sports. Everyone knows that the chances of an amateur winning at such competitions is zero percent. Not ten percent, not five percent.

Zero percent.

In almost all skill-based competitions, it’s practically impossible for amateurs to win due to luck.

But Not In Trading

At any given moment, a significant percentage of traders will be sitting on a paper profit, regardless of how skilled or experienced they are.

Consider Larry the beginner trader, who reads a few books and attends a Forex trading seminar.

He fires up his trading platform and immediately takes a few trades on his newly opened $1,000 account. Within an hour, he’s up $300.

To Larry, he has suddenly become a genius who will soon become very wealthy.

In reality though, this $300 profit is the bait that will lead him to lose his entire account in the coming days.

Fooled By Randomness

Every day, thousands of Larrys are trading this way. They think that making money on a few trades means that they are on the right track.

What they don’t realize, as Nassim Taleb puts it, is that they have mistaken luck for skills.

In chess, golf or tennis, there’s no way an amateur can win a tournament by luck.

But in trading, an amateur can make a lot of money quickly simply because he coincidentally clicked the right button at the right time.

That’s what draws people into throwing their money into the market time and time again – they think they know what they’re doing.

And so my friends, that’s why there’s so much money to be made in trading.

By |2019-03-08T09:26:23+00:00March 7th, 2019|Philosophy|6 Comments

6 Comments

  1. Scott February 3, 2016 at 7:01 pm - Reply

    Hey Chris,

    This article you put up is more informative with regard to self reflection than many may realize. I have been trading off and on, both forex and stock for eight years now. Stock trading is a relatively easy task where buying undervalued companies and holding the stock for long time periods sometimes years. But Forex for me has been a whole different animal and has shot every ounce of pride I had with trading right back in my face. Just another way of saying what you already have.

    Chris, you are the first “teacher” of fx that purely makes sense to me. I have over the years spent literally thousands on varying mainstream programs that promise results… all of them technical based, not one was based of economic indicators, at least not as in depth as yours is.

    Thank you for listening!!

    Scott

    • Chris Lee February 4, 2016 at 2:08 am - Reply

      Hi Scott, glad you liked this post! It was indeed written to get people to reflect on themselves, and their trading!

  2. Prince Berthram February 3, 2016 at 10:19 pm - Reply

    Chris,
    A popular saying is when you fail to plan, you have already planned to fail. When you have failed to acquire adequate knowledge, skills and know-how to equip you face the challenges associated with trading profitably, you have already prepared to loss in the business of trading.We have no other option left than to feed on you invested money.

  3. ben December 30, 2017 at 8:23 am - Reply

    Hi Chris,
    You are the first to describe Forex Trading as it is,I will not repeat what you have said but it is spot on.I can say from reading your comments that you are a honest person unlike many other so called “Gurus”I will follow your instructions regarding Forex trading.

    Regards,
    Ben

  4. ben December 30, 2017 at 8:49 am - Reply

    Hi Chris,
    I have a very simple way that i traded initially which made me a lot of money ,but as you said i tried changing it to make it more complex, which resulted in me losing money.
    Your suggestion of using Micro lots is what i was doing.I really enjoy reading your comments on Forex Trading which make a lot of sense.

    Regards,
    Ben

    • Chris Lee January 4, 2018 at 10:52 pm - Reply

      Thanks, Ben. Glad you like the posts I put out.

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