If you ever want to impress a potential new friend, it's generally not a good idea to tell them that you are a day trader. Over the years, day trading has been associated with well-intentioned individuals losing their life savings, jumping out of skyscraper windows, and going insane. While I cannot make any particular judgments about my own sanity, I have yet to lose my life savings or jump out of a skyscraper window. Yet the fact remains there is a tremendous amount of failure in the day trading business. Of course, this begs the question; why do so many day traders fail?

There are a variety of reasons day traders experience such a high rate of failure; some are very correctable, and others cannot be helped. Whenever I look over a chart that I have traded, I often ask myself why I did not take this trade, or that trade; it all looks very easy in retrospect, yet it is not as easy to initiate trades as the market progresses throughout the trading session.

Some of the most prominent and important reasons for failure are:

• Lack of preparation to trade. Trading is a full-time job and a trader must be aware of a wide variety of variables occurring on a global scale.

• Lack of proper trading technique. I suppose this is the most prevalent problem in trading today.

• Trading the wrong equity instrument. Some equity has tremendous begs to be day traded, while others are very difficult to day trade.

I begin trading in my own personal trading room at 6:15 AM, and I have usually been up for 45 minutes or so studying the overseas markets, the overnight markets, and a few predictive reports to which I subscribe. On the other hand, the majority of the traders in my room show up 5 minutes before the market opens without the slightest idea of what has occurred overnight and no idea about what the day's trading action may hold. Now you could argue that sense I am the moderator in a trading room it is my job to stay on top of the day's action; but it is my belief that trading rooms are good places to learn to trade and then move on. I would hate to consider myself a permanent member of any trading room rather than a well trained trader who is fully capable of placing trades without advice. My point is simple; to be a good trader you have to put in daily preparation before you begin trading.

By far and away the greatest deficiency I see in new traders, or traders who are struggling with their profitability, is a lack of proper trading technique. It's difficult to place blame on any certain cause in this dilemma, because I see trading systems that have been taught that are substandard and really have no chance for the trader to earn a consistent income. On the other hand, it is not uncommon to see traders who have taken a quality course but not put the time in to thoroughly understand and implement the principles of the course. In both instances, regardless of the cause, the new trader is destined to fail. From my standpoint, learning proper trading technique and being able to implement that technique is the cornerstone of consistent and profitable trading. Unfortunately, I have met very few new traders who have put the time and effort into learning a system well enough to implement it properly.

Finally, I see new traders trading a variety of equity instruments that are downright impossible for an inexperienced trader to master. I suggest learning to day trade on the e-mini's. But even on the e-mini's, most no students want to begin with the ES contract, which is (in my opinion) is extremely difficult to trade without a good deal of experience. On the other hand, there are a wide variety of lesser contracts with a great deal of liquidity that are far more forgiving than the ES contract. Just the same, the new traders that come to my trading room or training course have typically been failing on the ES contract. I asked them why they are trading such a difficult contract. The answers range from nebulous to an "I don't know." It is best to start your day trading experience on a contract that is forgiving and will allow you to learn at a low cost, and I stress this fact in my training.

In summary we have identified three basic areas where new traders tend to fail. I find most traders are poorly prepared, on a daily basis, to tackle the rigors of the Chicago Mercantile exchange. We have also noted that a large number of traders do not possess the prerequisite skills to ever trade effectively and must go through some retraining before they will be profitable. And finally, there is a good number of traders who simply trade the wrong instrument. Find a system, master it, and trade the right contract. That's the equation for success.

Real Live Trading Doesn't Lie. Spend several days in my trading room and see if you can benefit from a fresh and unique view on trading e-mini contracts. Sign up for your free trading experience by clicking here.

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