The difficulty of becoming a successful entrepreneur or trader

Being a successful entrepreneur or trader

10 Nov The difficulty of becoming a successful entrepreneur or trader

The Singapore Business Review (SBR) issue 50 (Nov 12) covered an article about deal sites. With the rise of Groupon, many copycats had sprung around the world and Singapore too, had joined in the race. Beeconomic.com was the success story. Karl Chong started the the site which was eventually bought over by Groupon. Karl remained as the CEO of Groupon Singapore. Most of us would have only paid attention to this fairy tale and wished we were in Karl’s shoes. We are cultprits of survivorship bias – we did not see how many had failed for a successful Karl. I am heartened to see SBR report on the failure rate of Singapore’s deal sites. It was mentioned in the SBR article that 3 in 4 group buying sites went out of business in the last two years. The surprising fact – 84% of these failed sites had ceased operations in less than 12 months. 19 Singapore deal sites remained as per the date of report and we do not know how many more will go bust in time to come. One of the reasons for the failing business is the lack of capital injection which is necessary for sustaining operations until profits are earned. Co-founder of AllDealsAsia, Goh Yiping said that 100,000 customers is the minimum for a deal site in Singapore to survive. This is assuming 1% of the customer base buy products from your website.

This brings to my point about many have to fail in order for the few to succeed. Nobody knew Karl would have emerged the ‘winner’ with his Beeconomic site, not even Karl knew it himself. This is what makes capitalism beautiful – only the strongest survives and the market will let willing participants fight one another out. The weaker participants will be weeded out of the race and like natural selection, the consumers will choose the best company to serve them. This company has claimed its role in the society and will continue to prosper until the consumers change their preference.

Now let’s bring this perspective to trading. Most traders fail as badly as entrepreneurs. There is an urban legend which says 95% of the traders lose to the top 5%. Whatever the figure is, I believe most traders have to fail for the few to succeed.  Yet, there are many trading courses in the market which promise you easy money if you just learn the skills they preach. Most people understand the high failure rate in business but not the high failure rate in trading. If more people can understand the equal chance of failure, I believe there will be less people willing to become a trader. I believe it is equally true that 95% of the traders who attend a trading course would remain unsuccessful as a trader.

I believe most retail investors are better suited to a passive investing strategy and I hope to spread this message to as many people as possible. At times, I would discourage people by showing them how hard it is to become a trader.  But maybe it is not a right way to do because a person may have the aptitude and attitude to become a successful one and I would have been the obstacle to his success. In fact, I should not be worried about these purpose driven people as they will find their own way to their success. They will probably ignore my message in totality. What I am concerned about are the retail investors who think trading can help them get rich quick.

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Why do you choose to be a trader? Why do you not want to be an entrepreneur? If you think your success rate is higher as a trader, I urge you to think again.



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14 Comments
  • ylfoo
    Posted at 07:27h, 10 November Reply

    Hi Alvin,

    Once again a well written post and thank you for sharing.

  • coconut
    Posted at 09:52h, 10 November Reply

    save your breath i say, if one don’t try one would never know.

    actually i was an unlikely candidate, when someone in olden days bucket shop introduce me to commodity trading, i remember he show me all the pictures of the products like coco beans and so on, i immedaitely think “wow thats a con game” and out right rejected him.

    few years later i was trading like crazy, in a bucket shop haha.

    • coconut
      Posted at 10:06h, 10 November Reply

      but back then i was a gambler, and trading and gambling are very much related. if you can’t find a strategy that will work for you, and you think by titam tikam all the time you can make money, trading (for a living) is just a dream.

      a professional trader would know what to do even before the market start to trade.

      • Alvin
        Posted at 10:49h, 10 November Reply

        How did you find your strategy? It is always interesting to know how someone ‘make it’ in the market. Would you be able to tell us what were the key milestones in your learning journey to become a profitable trader?

        • coconut
          Posted at 00:42h, 12 November Reply

          1, interest, no i mean passion or love to trade/gamble. not interest to make money, that one everybody has.
          2, hard work, this one is difficult for me cos naturally i;m lazy.
          3, understand yourself, let your naturally self guild you to your strategy, not the other way round, which is learn a strategy and change your behavour. in another words, develop your own strategy that suit you.
          4, understand how market works, many got this one wrong and very deadly. how market works are similar to how nature works. your strategy mainly derieve from the understanding of the market and of yourself.
          5, integrate your trading ideas into all aspect of your life, you don’t on one hand believe in one thing in the market and in life do it another way, for example money management, where you can cut losses quick when trading but in life you spend money like wild fire.

          i change and be able to trade when my believes change totally. i learn to do what i can’t do before, i learn to love or accept what i can’t accept before, while still keep my natural self. the more i can do it at ease, the better is the trading results. and if your only reason is to make money, you will not be able to do it.

          i stop here.

          • coconut
            Posted at 01:13h, 12 November

            to sum up,

            you need to be “balance” in all front to be a good trader.

            and to be able to “balance” yourself, especially in trading, you need to be very flexible, in your minds (believes) and actions.

          • Alvin
            Posted at 01:18h, 12 November

            Basically u r saying traders wannabes should look internally to understand their own beliefs and behaviour. They also need to understand externally how the market works. Then they find a strategy that allow them to function in the market at ease.

  • forexpiper
    Posted at 01:35h, 12 November Reply

    yes, we all know trading is difficult. many i know could not even trade consistently even when they have been spoon-fed the strategy and other knowledge. Many will be hyped up and they will try for a month or so. Then all the distractions and self-doubt will set in. Trading is not tough menially. One would really need to love the game to bring him through the many years of losses, then slowly to breakeven, then to profitability. This in my opinion is the most difficult. Not trading itself.

    • Alvin
      Posted at 04:18h, 13 November Reply

      That is a good point: Trading is not difficult, it is about persevering through the years of losses.

  • coconut
    Posted at 02:04h, 12 November Reply

    in order to find out what kind of a trader one is, unfortunately, one has to trade first, if you don’t trade and trade and trade, how the hell would one know?

    it is through lots and lots of trading would you know bit by bit, what kind of a trader, or should i say what kind of emotional being one is.

    as for the market function, its a relative easy one, its a relative market place, where all market are interwine and related, just like nature. in an extreme, you can even argue that when you sneeze will cause the US to have a horrican next month.

    and about strategy, no need to look for one advance or complex strategy where nobody knows like the algo. do it just like what the digital age is doing, using simple “0” and “1” combination to create what ever immage you desire. in another words, using simple ideas with different method to combine into one overall balancing strategy.

    • coconut
      Posted at 05:02h, 12 November Reply

      on a deeper side, the trader need to stand a side and stay nutral to evaluate himself and thats not easy, let alone to understand their own beliefs and behaviour!

      one easy way for me to do is to crash (challenge) my own believes and any of my excuses for doing something.

  • fat88trader
    Posted at 05:38h, 12 November Reply

    Haha, Coconut, you are here to share your 1 Dollar worth of trading ideas!

    95% of the losers don’t lose to the top 5%, most of the losses are due to commission and other expenses for providing a secure trading platform for us to trade or gamble, depend on how you look at it.

    In the past, I used to play majong at one of the clan association immediately after the first session close of the market, we would take our lunch early and by about 11 am, the four kakies would sit down for minimum of 2 rounds of the game. We paid $15 for each round to the association for providing the place and service, so normally about $30 for 2 rounds. We make money from each other but at the end of the day the 4 of us would be poorer by at least $30. We would at least contribute about $660 a month for trying to win from one another.

    To all the traders, be conscious of the cost of trading, keep it to the minimum until you find that edge.

    • Alvin
      Posted at 04:16h, 13 November Reply

      Hey fat88trader, nice to see you back in action :D

      Yes, I know you have always view trading as a negative sum game because of commissions and your mahjong example is apt.

  • coconut
    Posted at 01:12h, 14 November Reply

    only 1 dollar?

    “is not that my company is not making money, we did!, but all of it went to pay our employees, i think i should fire some of them to keep us in the green”

    haha ok i agree with fat this time.

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