The vast majority of rookie traders don’t manage to make a profit in the markets. In fact, it’s practically unheard of for someone to deposit once to their trading account and never bust the bankroll. After all, we have all heard the stats that 90% of traders (or more) lose money in the markets. But, what is actually driving this mass failure?
Well, for starters, maybe people simply don’t have the right tools to execute trades efficiently. Some don’t take the time to do proper research beforehand. Others lack any structured plan for deciding when to buy, sell, or cut losses if things head south. And you better believe the mental game trips up tons of newcomers. Fear and greed have the potential to bring about some nasty pitfalls when real money is on the line.
But just because trading is hard doesn’t mean you can’t make it. You can absolutely become a profitable trader – you just need the right building blocks in place. At least that’s what CEO and co-found of StocksToTrade, Zak Westphal, had to say in a recent interview. Zak has been trading small cap stocks aggressively for over a decade now, and he’s learned firsthand what it takes to make this work consistently through brutal trial and error – not to mention the countless stories he’s seen through his community (both successes and cautionary tales).
Q: Big picture Zak – why do most beginner traders fail to find their footing?
For starters, most don’t run trading like an organized business with strict processes. Without defined routines guiding your research, chart analysis, position entries and exits, you’re just rolling dice and hoping for the best. The pros have finely tuned systems that take emotions out of the equation as much as humanly possible. That structure eliminates hesitation, distraction, and deviation when you need to act quickly and decisively.
Newbies also severely underestimate the mental game I mentioned earlier. They dive into trades when the action gets juicy without carefully planning things out. Then, when some losses inevitably hit, rather than sticking to their strategy, they freak out and abandon ship altogether. You have to temper emotions no matter what’s happening and trust your system in the heat of the moment. Get rich quick dreams also hurt beginners. This is a gradual game built on small gains compounding through dedication over months and years. Stay patient, trade small to start, and notch consistent wins. Momentum really snowballs.
Q: Part-time trading – what markets offer the best risk/reward balance in your view?
If trading part-time, really focus on just one, maybe two market segments that get you genuinely excited. Personally, I trade small and mid-cap stocks full-time for that explosive upside potential. Their lower prices let me buy larger share sizes and maximize percentage returns with limited capital. I also love hunting for catalysts, signaling a big move could be brewing.
But choose your niche thoughtfully based on natural interests – don’t just blindly follow the herd. Maybe you really understand crypto, forex or options trading. Specialize in sectors that align with your passion so it never feels like a chore. Trying to split focus across too many areas as a newbie is a recipe for failure, though. Oh, and blue chip dividend stocks can be a nice stepping stone for part-timers before venturing into more volatile waters.
Q: Absolute must-have resources/tools for traders in 2024?
For the longest time, all the advanced trading tools were exclusive to Wall Street only. But I’m on a mission to change that by hooking up main street with cutting edge firepower too. Retail traders deserve access to systems previously reserved for the big shot institutions and hedge funds.
So I built an all-in-one platform aiming to level the playing field for traders without huge budgets and data teams. This includes technologies enabling retail investors to research ideas, analyze price action and execute orders smarter and faster than ever before. We can piggyback institutional-grade algorithms, AI analytics, and automation to give ambitious individuals game-changing potential.
For example, you can instantly filter for stocks exhibiting unusual options flow or volume spikes, signaling possible insider moves brewing beneath the surface. Natural language processors parse news/social media to uncover market-moving narratives as they emerge. You customize fully automated screeners to funnel only the best ideas into your workflow, aligned with personal strategy and risk metrics.
The game moves fast, but now average investors can keep pace using institutional-grade technology tailored specifically to amplify returns.
Q: How do you recommend new traders successfully handle emotions and cultivate discipline?
Paper trade, paper trade, paper trade at first. Use a simulator to mirror a real trading interface and experience emotional swings as prices fluctuate dramatically. But mistakes don’t cost you real money, which is invaluable for beginners getting their sea legs. Document teachings after each paper trading session regarding what decisions and mindset delivered good outcomes versus where you tripped up. Journal like crazy to cement productive habits and kick detrimental tendencies giving away money.
After you’ve conditioned responses through paper trading, commit to rules-based position sizing and stop losses as you transition to real skin in the game. Structure trades and define risk/reward according to account size ahead of time, not gut reactions in the moment. Let your winners capture upside volatility, but cut losers fast per the rules without thinking twice. This insulates you from trading on emotion rather than logic and quantifiable factors. Accept occasional stopped out trades and modest losses as inevitable and part of the cost of doing business. Stick to the proven guidelines, master your mindset, and move forward.
Q: What common denominators have you observed among the truly consistent, profitable traders in your network?
The best traders never stop advancing their knowledge, rather than winging it on any single trade. They absorb premium resources and communities daily to constantly step up their game. They also review their own trades relentlessly after the fact to fuel future improvement, whether winners or losers. No such thing as status quo.
I also see them actively collaborate in small peer groups, not just running solo. They discuss setups, market conditions and refine technique through accountability partnerships. Iron sharpens iron amongst them. They understand that isolation breeds stagnation so feedback from respected colleagues forces progression.
Lastly, the most profitable traders run operations like a business, not a gambling outlet. They follow proven frameworks, quantify metrics religiously, constantly fine-tune processes under the hood. They filter dead-end ideas fast to concentrate time only on the best risk-reward trades exhibiting definable edge. After all is said and done, they analyze income statements regularly to spur elevated profits, just like any profit-hungry company.
Final Word
According to Zak Westphal, becoming a profitable trader is 100% in your grasp if willing to put in the work. Study the frameworks and tools successful people applied before you model the process. Keep learning, surround yourself with positive peers, and run it all like a business – eyes always on optimizing performance. It won’t happen overnight; stay patient and trust your system. But gradually, those consistent green days will snowball as experience compounds.
