We all have heard the statistics: the very low percentage of market participants who ultimately make their livings from their trading. Here, from a trading psychology perspective, are three reasons why sustained success is so elusive:
1) Markets are ever-changing - It is common for a trader to find success with a particular strategy (such as trend/momentum trading), only to lose money consistently when market conditions change. The successful traders I've known find multiple ways to win, which provides them with diversification and ways of succeeding across market environments. But that requires research and the ability to continually acquire new sources of edge. Many people are interested in trading; not so many in continually learning and adapting. The challenge is not just succeeding in trading, but sustaining success.
2) Trading requires the ability to navigate a contradiction - Trading is all about making money, and yet it is the focus on money that leads to many of the behavioral mistakes of money management. The more we focus on making more and trading larger, the more we can overtrade and trade reactively. The best traders I've known are idea focused, not primarily focused on profits and losses. What attracts many people to trading is precisely what needs to be put aside in order to succeed.
3) Markets are more efficient than ever - Strategies described by great traders of the past simply do not work any more. With so much computing power devoted to markets at every time frame, it's unlikely that one will find success by looking at the same charts, indicators, and data series as everyone else. I'm seeing many traders succeeding by focusing on less efficient markets and more specialized trading strategies. At some point in time, making a living from gold mining in California became very difficult. The easily accessed ore was already mined. That required going to new areas and utilizing new mining techniques. Many traders seek success by doing what others are doing. That's like digging for gold where everyone else has been digging.
There are many would-be pundits and gurus talking about sure-fire ways of making money in markets. Very, very few provide verified track records of their success. The reality is that it is quite difficult to succeed at trading, just as it's difficult to make a living from playing a sport or from singing and dancing. It's fine for the developing trader to have eyes on the stars as long as they also have feet squarely on the ground.