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Why do most traders lose money in the market?

Quoting dcginc
From a previous post of mine . . .

The fact that between 90-95% of traders lose money is more than adequate evidence that trading is not easy. My strategy is to see what these 90-95% are doing and do the opposite.

A mechanical system is simply a set of rules to build a case for entering the market. The biggest hurdle facing traders is what to do after a trade is placed. Therein lies the greatest psychological challenge.

[font=Calibri][size=3]A complete trading...
Good post.

I think it's possible to reach a state where trading becomes easy though, like any profession. Practice cannot make perfect in trading but it can certainly make near perfect where you worry very little about any given trade because you know your entries are so solid that you'll win more than you lose regardless of that single trade.

Anyway, i'm going to add a leftfield answer into the mix here. How about "paranoia" as a reason that so many traders fail? Of course, we have all been a little paranoid that certain trades will reverse on us from time to time but when I first started trading, I had massive broker paranoia. I'd read so much about how corrupt brokers were that I was convinced that they were going to roll the chart against my profitable position and take my stop out. I'm actually slightly ashamed to admit that now but I have no doubt that this paranoia lead to me closing trades way too early in the embryonic stages of my trading career.

There's another reason as well. It's the elephant in the room. Few will ever talk about it, few will ever want to admit to it regardless of whether they are in the winners circle or not. Some will deny it to themselves through delusion. Most of us realise it and there's probably a fair few people thinking it right now but don't want to be the one's to have to say it...to admit it.........come on, who will release that elephant?
Because it's very hard...
Quoting dcginc
From a previous post of mine . . .

The fact that between 90-95% of traders lose money is more than adequate evidence that trading is not easy. My strategy is to see what these 90-95% are doing and do the opposite.

A mechanical system is simply a set of rules to build a case for entering the market. The biggest hurdle facing traders is what to do after a trade is placed. Therein lies the greatest psychological challenge.

[font=Calibri][size=3]A complete trading...
99% of traders just make up a plan / strategy and have no idea if it is a good one. Following a bad plan is as bad as not following a good one.

And the majority of strategies are not profitable over +10.000 trades.
Why do most traders lose money in the market? Because it's really difficult and doesnt feasibly for everyone (as morally as physically)
Most traders lose for 2 simple reasons...

 

  1. Greed
  2. Fear

They see trading as a "get rich quick" deal, and don't take the time to learn what trading is and just how dam simple it really is.

It takes thousands of hours of watching monitors, squiggly lines and losing trades to learn the 2 things that one must get control of to be a successful trader...

 

  1. Learn to be patient (control your greed).
  2. Take your losses with grace (control your fear).

I have put in over 10,000 hours looking at squiggly lines on stupid charts and learned to be patient.

If I can't see a potential setup on a bare daily chart after midnight GMT, that has ONLY support/resistance lines on it, I look no further.

Go fishing, go to work, go to sleep, go chase women... whatever, but if there's nothing on a daily chart that lights my fire, I'm outa there... period.

In the days of old when sailors were bold, and seldom if ever contented.
Quoting pt49

I have put in over 10,000 hours looking at squiggly lines on stupid charts and learned to be patient.


Congrats, that means you should be a world expert. I still have thousands and thousands of hours to go...
Twitter: @forexpokerpro
Quoting dcginc
From a previous post of mine . . .
What a great post, thank you. Now I'm going in search of more of your writing...
Gone to a better place
Quoting BBPI_fxtrader
Congrats, that means you should be a world expert. I still have thousands and thousands of hours to go...
yup, i'm sure you do, as do I. The job is never done.
In the days of old when sailors were bold, and seldom if ever contented.
Quoting AlastorFate
I am sure most of you have heard of the statistics that states that 9 out of 10 people lose money from trading, be it whether it is trading equities, currencies, commodities, futures or options. I do acknowledge trading is 'difficult' to a certain extent. Let's discuss about the common reasons why many traders incur losses from trading.
Mental discipline
Quoting Akuma99
There will be the usual replies based around technicals, let this run and cutting that short. All important to a degree, but as I had to learn the hard way for the last 12 years or so, a lot of traders lose money simply because they don't understand themselves.

We all have internal triggers, warning signs that something is not in balance with a decision made, and whether that be in health, safety or trading, it is easier to ignore those signs than act on them.

A blown account is a loss of self control, I see very few accounts get blown up...
+1 ;-)
  •  duca
  • | Joined Dec 2011 | Status: Investing is simple, but not easy | 409 Posts
I talk about forex:
lose because they do intraday;
for overtrading;
timeframe for trades of less than H1;
e. ..... why not read FF
give 1 and get 100
I don't believe the problem is intraday. I know there are many traders out there that still make a living on trading intraday. just another misconception just like this number.

The market is a whore that is out to F*VK everyone.. she'll even lie to you to put fear in your heart.

I think it's all bullshit and is totally negative on our psychology causing you to fear the markets and in short lose money.

have confidence in your skills and trade with a chip on your shoulder!! happy 2012 and chinese new year!.. its the year of the dragon btw
Fear of success. This may lead traders to belive the amount or resposability will increase thus decreasing the fun factor.

The trader could also develop an addiction that could turn him/her to a system nomad not giving enough time for any system to perform.

Not able to accept huge gains.
yup completely agree.. They want you to fail as soon as you step foot in this market.

you are basically now a 'weak holder' without even researching further you are destined for failure

Psychology is the hardest thing to learn in this market.. but once you master it you will know that you're finally successful. something clicks and all of a sudden trading becomes quite boring and repetitive. Breaking bad habits is probably the hardest thing to do in human nature and following the herd is just a result of uncertainty.

the herd being the majority of traders on the wrong side of the market when reversals occur
  •  duca
  • | Joined Dec 2011 | Status: Investing is simple, but not easy | 409 Posts
precisely what I said, I speak for me:
I only lost because intraday and other things that I said ...
give 1 and get 100
I think its because many traders risk too much , the greater the risk the quicker your account will get depleted and thats it , you've lost your money. Minimizing risk will most of the times lead you to profit , patiency is required.
Quoting bianco
I think its because many traders risk too much , the greater the risk the quicker your account will get depleted and thats it , you've lost your money. Minimizing risk will most of the times lead you to profit , patiency is required.
That doesn't make any sense, risking less just means you blow up your account slower. In the short run you need either luck or a profitable system & in the long run only a profitable system will work.

Most traders lose because they don't have an edge. While there are edges that can be exploited those edges are mostly small and consistently making money from them requires a degree of discipline that most don't have.

Trading is mostly about grinding out small profits day after day, with the occasional home run trade thrown in.
I think that most of traders don't have enough knowledges for trading. Most of them start trading after 2 days demo trading, it is wrong. Also they use small accounts and when they lose their 100$ they decide that it is not their way.
Okay, let's have fun...
The topic of why most traders fail been discussed countless times before.

The debate invariably sorts itself into two camps: those who believe that many years of research is necessary in order to develop a robust methodological edge; and those who believe that almost any method will work successfully, provided that you have the mindset needed to execute it consistently.

So take your pick. I lean toward the first camp, for whatever my opinion is worth, but that's probably because I've found simple, commonsense ways to alleviate the 'psychology' part (which I've shared many times elsewhere).

But I acknowledge that there's not necessarily a pat answer to the OP's question; after all, everybody is different.
Quoting Custos
99% of traders just make up a plan / strategy and have no idea if it is a good one. Following a bad plan is as bad as not following a good one.

And the majority of strategies are not profitable over +10.000 trades.

How many accounts have you seen with 10,000 plus trades to back that statement up?

Just a question.

Or better the reason why a system has a better chance up to 10,000 trades?
My trades are 100% profitable 65% of the time!
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