You've probably heard the statement that 80% of traders lose. This may be a correct assumption but let's take a look at the factors that can contribute to a traders P&L heading for the red zone.
Lack Of Information & Risk Management - Traders often jump into trades without doing the correct research. It doesn't matter if you look at Fundamentals, News, or Technicals. Every trade must have a gameplan. Why are you entering the trade? What price have you decided to enter at and why? What is your max loss on the trade in case the position turns negative? What is your profit goal on the trade to set a trailing stop? All of these thoughts should run through your head when making a trade so everything is set in stone and your worst case scenario is already planned.
High Trading Costs - Many individuals trade at retail brokerage firms which are a complete ripoff. This isn't the 80's or 90's anymore and trading can be more successful than ever. We can sit at the comfort of our homes and trade stocks frequently from 9:30AM to 4:00PM without ever leaving our seat. However, many traders choose the wrong firm to trade at, often paying upwards of $7 per trade! This means that just 50 round trip trades end up costing $700! The best way to keep yourself ahead is to join a proprietary trading firm that utilizes the same benefits that hedge funds and professional traders use to stay successful in the markets. Proprietary trading firms may offer traders trades for $0.65c or lower depending on share volume per month.
Slow Data & Execution - Many firms will show you delayed quotes or charge a monthly fee for real-time data. When it comes to trading, data is essential to get the best entries and exit prices. Some traders make money off pricing differences (arbitrage) and execute trades at a better price than the average trader because they utilize lightning fast real-time data. Level 2 Data is a must when trading. Another obstacle that traders face is execution. When entering or exiting a trade, you should feel comfortable in knowing your orders will be filled in the fastest time possible, and the exact price at that time, especially if you are placing a market order. Proprietary trading firms will often give you an edge in execution speeds.
ECN Rebates - By buying or selling short a stock directly from an ECN (Electronics Communication Network) you may get a rebate from the ECN for a transaction. These rebates may be small if you don't trade large volume, but will definitely save you money on your trading costs in the long run.
The way to get an edge in trading is to not let these obstacles be in your way. Trade at a proprietary trading firm and get the same benefits and advantages that Hedge Funds utilize to consistently stay successful in the markets.