Top 3 Reasons Investors Fail with Money

Top 3 Reasons Investors Fail with Money
August 2, 2021 Market Traders Institute

James Bishop knows what it takes to set investment goals and how to achieve them. Bishop spent many years learning the keys to financial success from his personal mentor, MTI founder Jared Martinez (The FXChief).

In his role as a senior market analyst and client success coach, Bishop has taught thousands of traders those same proven principles that he still practices daily. He currently leads live weekly student webinars, where Bishop shares his market analysis and covers the latest trading opportunities.

(Click here to register for our next free education webinar.)

Bishop shared his expert observations on why investors fail to achieve their financial goals.

What are the biggest reasons why some people don’t reach their goals?

Bishop: I think it’s a three-fold reason. The first reason is that they don’t really know what it’s going to take to hit their goal. Investors just say, “I want to make this amount” and then they don’t do the math to break it down.

If you’re wanting to make $4,500 in a year, then divide that number by 12 months, which gives you a monthly total of $375. Next, divide that number by 20 trading days in a month and now you’re looking at needing to make about $19 a day. That’s way more realistic.

Traders often don’t do the math to break down their goal into the simple steps. Ask yourself, “What do I need on a daily basis to achieve my goal?”

The second reason that people fail to reach their goals is that we lie to ourselves all the time. We lie to ourselves about the idea that we don’t have enough time to get things done, but yet we find time to watch our favorite TV show every week. We lie to ourselves and say we don’t have enough time, but yet we can watch TV, play on our iPhones, etc.

Just because you exist does not give you the right to be successful. That’s something I’ve learned the hard way. Just because you were born does not mean you are automatically granted success in this world.

There’s a third factor why people don’t achieve their goals. We are not okay with failing. We look at failure as final, but failure is never final. Failures are never finite. Problems don’t come to stay. They come to pass.

I’ve worked with many clients in the past and one was an architect. I asked him, “If your building design accidentally failed, then what would that mean?” He told me that the people in that building would likely lose their lives.

So I said, “Listen, no one dies if you take a 30 pip loss. It’s okay to take a loss. But look at your trade and say to yourself, ‘What rules did I violate to cause me to take that trade and what can I learn from it?’”

A lot of people are afraid to fail and then they don’t study their failures because they’re upset that they failed. Here’s what I would tell those people: You’ve got to go through “suc” to get to “success.” You have to be okay with failure and learning from your loss.

How should traders balance potential rewards along with risk exposure?

Bishop: Ask yourself, “How much are you willing to lose?” I once had an interesting conversation with one of my mentors outside of MTI who manages a hedge fund.

Early on in his career, my mentor had this client who said, “I’ll invest $10 million with you.” So the fund manager asks him, “What are you willing to risk In drawdown or losses?” And the client replied, “I’d be okay with risking 20%.”

He asks the client again, “So you’re willing to risk $2 million of your $10 million?” But the client says, “No, no. I said 20%, not $2 million.” You see, the client didn’t do the math to understand how much he would actually be risking.

Know what you’re willing to risk and lose in actual pips and dollars. So that way you can see how to fix the problem if you do take a big loss.

You may have to say, “I’m going to take the rest of the month and go back to trading my demo account. I’ll refine my trading methodology and then get comfortable with holding my positions and understanding what I’m doing as a trader.”

You could go back to the drawing board to make improvements and then return to trading at the same lot size as you were at before.

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