The Perception of Success : How We Get an Erroneous Idea of What the Market Has to Offer

It is just natural to wonder why so many people get into trading with expectations of profit which are so unrealistic. It is granted that a large portion of this phenomena can be attributed to the way in which forex products are mass marketed with false track records and testimonials but – more than that – what happens is a very common phenomena – almost inherent to our nature – that affects the way in which we perceive the balance between losses and profits within any type of endeavor. On today’s post I will talk about the perception of profitability and the reasons why something like forex attracts so many new traders when their real chances of success in the long term is actually close to zero.

When I started to trade in the forex market there wasn’t actually any widely known statistics about “how many new traders failed” because they weren’t simply enough new traders at the moment and the retail forex trading business was probably extremely young (the ability to trade small accounts had just appeared).  Therefore I started trading thinking that success was probably something easy to achieve since everything looked quite straight forwards. Obviously this wasn’t the case (as many others realized) and the journey was much harder than anticipated.

Today almost all traders who start to get into the market know – as a sort of myth – that 95% of retail traders fail to achieve any kind of long term profitability. This is in line with the same statistics for long term success on almost all other business endeavors in life. Research has shown that the “1 in 9” rule follows almost everything worth doing from a profit perspective. About only 10% of the humans who try seem to have the necessary qualities and life circumstances to achieve things as successful restaurants, coffee shops, etc. This is also curiously in line with the fact that the top 10% earning population earns staggeringly more than the other 90%. It seems that only 10% of people are naturally good with money and the rest of the people – although not completely unskilled – struggle to reach the same levels of success.

What is then the factor that pushes people to try something in which there is a very high probability to fail ? Certainly there are two things that drive people to get into a journey that has such a high failure rate. The first things is the wish to consciously try to get inside the above 10% despite the odds and the second is the perception of success. This is a phenomena that happens with all businesses.

The perception of success determines how easy or hard something seems despite what reality actually is. For example if you want to become a restaurant owner the perception of success drastically contrasts with reality since you only see active restaurants which have survived. Since all you have seen – for the most part – in your life are restaurants that “make it” your perception of the likehood of success on this business is extremely high. You unconsciously think that success is easy because “everyone has made it” — a clear survivorship bias in which you are only taking into account restaurants which are open. This perception is important because it doesn’t change the reality behind the fact that 90% of new restaurants failed and you have got into a business without considering how hard it really will be.

In forex trading the perception of success follows a similar pattern. People are very eager to share their success and very unenthusiastic about sharing their losses. When you go into forums about automated trading you find many people claiming success with A or B system and manual trading forums offer a similar perpsective with people showing very profitable live or demo accounts a good amount of the time (when accounts are shown). The idea the new trader gets – added to all the hype – is that being successful isn’t that hard because a lot of people are achieving profits.

Sadly this doesn’t change the reality of automated trading and long term profitable trading. After being on the field for a while you’ll notice that commercial systems seem to go through cycles in which they are touted and gather a “following” which trades them very successfully only to later crash and burn (at least most I have followed through the years). You never end up hearing about the ones who “go down” (because they only do so briefly) and every time you enter a forum around this subject the highest like hood is that you’ll find that the most recently updated threads are about this “short term success ventures” and the ones which have failed lie forgotten within the forum’s old history.

The same thing happens with reporting services such as myfxbook. At every time you are bound to find at least a few hundred live accounts with more than +100%  profits, something which erroneously leads you to believe that success is very easy. In reality there are only a handful of accounts with more than one year of track record and – even then – this is still too short to say anything about long term returns. In the end you’re not seeing the thousands of accounts that go under after big profits and you’re only left with a “permanent show” of accounts that have simply performed tremendously well due to high market exposures that haven’t been cashed (and the market always cashes in the end).

As with all businesses out there, in forex trading the perception of success plays an important role since there is a clear failure of the internet to show the large amount of failures around it and therefore it is quite easy to perceive that this business is much easier than what it actually is. In the end this is what will cause most new traders to face drastic and devastating losses within their first year and many more to pursue an endless race to find the “easy way in”. In reality most people end up quitting forex altogether and the internet continues to show its short term profit perspective that seems so appealing to new traders.

In the end you need to get past this perception of “easy profits” to be successful but such a thing is sadly only possible – at least for most people – until you go through the rough aspects of this business yourself as the perceived reality sends contradictory signals which you need to eliminate through personal experience (this is something that explains why new traders tend to be so stubborn and uneager to follow advice). Before you actually get a feeling of the reality of long term profitability, getting through will most likely be extremely hard.

Of course, after you get through it will become obvious that long term profitable trading cannot be achieved easily and a lot of effort and a lot of understanding is needed to get to that point where only a few manage to arrive. If you would like to learn more about my work and earn a true education in the field of automated trading then please consider joining, a website filled with educational videos, trading systems, development and a sound, honest and transparent approach towards automated trading in general . I hope you enjoyed this article ! :o)

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