Why do Newbies Lose?

This is the correct, definitive answer. I know, because I was like that and I see them making all the same mistakes.

Trading currency is never a 50-50 game. With the spread on hand, you are already losing when you enter a trade.

Do not forget that the market can move sideway instead of up and down and this again reduce your probability to less than 50.

main reason is they dont know what it feels like to trade a winning strategy....so even if they stumble on a good strat they chop and change at the first drawdown phase of the strat and never realise its potential.

in other words...they want to win all the time

Its not as simple as 50/50. Most of newbies - when they have a winning trade they get out of early with may be 5 or 10 Pips. On other hand on lossing trade they regularly loose between 50 -100 pips due to SL or lack of it

One of the other major mistake is over leverage and over confidence. A newbie can blow up after having hundreds of winning trades and but one disaster trade. Also, lot of newbies have tendency to fight with forex market instead of trading the market like smart money do. They have no chance of wining the fight.

Remember, Mosquitoes hunt humans for their blood successfully by planned sneak attack, not by outright fighting.

"Remember, Mosquitoes hunt humans for their blood successfully by planned sneak attack, not by outright fighting"

Great quote....... definately the model of a mozzie (as we call them here in Australia) is appropriate...... sneak attack and hitch a ride on the money flow for our little sip of currency !

Newbies...... develop your Mozzie senses...... sniff out the money flow and hitch a ride

Surely there is a simple trading system that has better than 50:50 chance? Otherwise, trading is just a coin-toss decision. I can't believe that there is not a simple trading system that improves the odds to better than 50:50.
Anyone care to share?

because you can't see what you can't see, and don't know what you don't know.

i'm sure i read it here somewhere... in the land of the blind the one-eyed man is king, or something.

Yes of course there are many mechanical systems that will improve odds, i was just referring to trading with no strategy, ie randomly buy/selling on a whim

Hi there, it is kind of a late answer, but i understand where rooicol is comming from. I'm not going to repeat the obious but mostly good answers from above, but I want to shed some fresh light on this.

First: Who says that they are losing? I remember my first couple of trades where mostly winners, although i didn't have a clue. It's kinda like playing poker for the first time and still winning the game.
If novice traders where consistently wrong most of the time, the obvious thing to do would be a) starting an investment company, b) hire a lot of beginners and c) do the exact opposite then what they do.
The problem would be that even if beginners where consistently wrong, they are still human beings and therefore would learn. And as Michael Shermer suggest in his speech the believing brain they would find all sorts of patterns and rules that completely screws any kind of reasonable behavior in the market. Ergo they would change their strategy 5 times a day and pad their own shoulders when they get lucky enough to make some profit. (Hey, speaking bout myself here)

Let's approach more of a mathematical answer to the question. Yes, the odds are 50:50, provided that there is no spread or commission involved. Now if you code an expert advisor that loses consistently, u should reverse it - for the sake of a better understanding your own strategy. Switch Buy with Sell, StopLoss with TakeProfit and Traling Stops with Traling TakeProfits. (Yes! A Traling TakeProfit to ensure your losses!)

if your backtest then goes up, you definetly should consider a reverse strategy. If the curve goes down nevertheless, your strategy doesnt give you an edge and you will lose money due to spreads and commission. So my pure mechanical and certainly obvious answer to your question would be that spread and commission hurt a lot more than we think. Or to make it more mathematical: the odds are not 50:50, they are 48:48:4, whearas 4 goes to the broker. A little like roulette and casinos.

I started trading last September and I haven't completely drained my account yet(micro account) but I went into trading with a trading system that was based on all indicators. I also was pretty greedy and risked too much per trade. If I had a losing trade I would get very paranoid about my next trade so I wouldn't take the signals my system provided. Then, I would see the would of been trade go up and then try enter in on the trend at the end. So, I was basically buying at the high. Isn't it supposed to be the other way around?

I am no where near fixing those problems. When I lose I still feel that sense of lose. I hear experienced traders do not even blink at a lose because they know their system will come through. So, I guess my biggest problem is I still do not have confidence in my system which I believe is a must.

So basically I have been failing because of the reasons posted earlier by vik22. When I first started live trading I thought I would never do any of this. Boy was I arrogant!

My personal opinion is because new market participants are conditioned from the start to do the wrong thing. MA crosses, Stochastics, all of those nice indicators that are set by default on your broker's charting package. It doesn't help that the media loves depicting floor traders as having ten thousand screens all filled with indicators as well. Additionally, I believe much of the conventional "wisdom" to be quite the opposite. Question everything until it actually makes sense. "X crosses Y will make you money" is a nice statement but why does it work? Does it make sense that that would work?

Dig deep to the most basic elements of what makes a market move and you'll be heading in the right direction.

Yup! The hype regarding the indicators are just that, a hype. Indicators do help but to depend only on that is idiotic..
And most newbies, think of indicators in terms of a green arrow, pointing the path to the nearest ATM. As others have posted, learn the basics and work out the rest..

Because they do this:

(first picture)

http://www.forexfactory.com/showthread.php?t=409396

There are many factors contributing to trader's losses (even experienced ones, not just the newbies). A search on the web should uncover most of the reasons for you.

However, I can say with great certainty that the number one cause of a trader's failure to consistently profit, is their inability to consistently execute their trades based on their trading plan. And there lies the problem - most traders do not have a plan! Without a plan, emotions takes over the driver seat.

I am not saying that a trader will turn into an emotionless robot when he has a plan. But at least when there is a plan it can serve as a constant reminder on how a trader should approach the market based on what he has learnt thus far.

I see psychology hawked quite often as the primary reason for new traders failing so badly. But my observations lend to the idea that perhaps it isn't so much psychology that is the underlying problem so much that they don't have a real edge. And if you have doubt that your method works, we run into other problems such as psychology. Verifying that you have a real working edge is important.

Overconfidence and get rich quick mind.

Just wondering what exactly do newbies do to lose?

What they do is trying to "trade."

When I started forex years ago, I rarely lost because I didn't "trade" per se. What I did was, I go short and long at the same time on the same pair (hedging), and take profit when I "feel good" about getting 200 or 300 pips. Then, I go short and long again from there, keeping the losing position. Then, go on and on and on. I ignored all common sense, such as SR, news, and STOP LOSS. Yes, this way I had to keep lots of positions all the time, but somehow I could manage not having too many positions.

I did it on a live account for about 6 months and made a certain profit (pretty good actually). Oddly enough, I didn't get a huge drawback -- maybe -500pips in every 2,000-3,000pip profit.

As I studied about trading, all the sudden I got scared of doing it. Yes, I was sucked into the "dark side" in that moment. I quit doing it and started "trading" on a demo account, which I blew numerous times. It took me a couple of years to get on a live account again.

I wish I could do that again....

Thanks for sharing your story. Very realistic one.

There are some interesting answers in the attached.

simply because they do not understand what is going on in front of them, they do not know how technicals mix with FA, when to buy and when to sell, FX require a very good level of economic knowledge, it is not only about currencies, you got bonds, commodities, stock market etc.
You can have the best mechanical system and MM but if you do not know what is cooking fundamentaly, you will never be able to gain success in this business,
Trust me, spend some time and you will drawn similair conclusion.