Why 95% Of All Traders Fail

The first reason is that because of lack of business attitude towards trading. Trading is a business, and it requires relevant attitude. But what most people do when they first get interested in trading? - Open a position and get a profit. (this is axiom, every rookie gets profit from his or her first trade). Why does it happen? Why no loss? - Because this rookie doesn't have a fear yet and has a right attitude. After the first profit, he gets sucked by looking for this profit again and again, being so overloaded by this emotion which doesn't allow him to find good trades, and even if he finds good trades - he can't stand closing it. This is psychology. Who were businessmen, they know about this state of one's.
Second reason is that they lack good mentor or coach, because of lack of those. Therefore, no good education and result is evident.


My favorite quote:
" To learn any skill, you must begin by learning the necessary objective facts and features—the tools with which you will build your skill from the ground up. " - J.F.Dalton

They don't know that they don't have enough knowledge and skill it takes to trade profitably yet they're trying hard to make fortune trading fx.

traders fail because the skip the first three chapters of anything worth studying, like writing a plan down, position sizing, discipline etc etc and go straight to the "where's my entry" section...

Entries matter of course, but probably the least important factor...

How many traders who just went short the euro can honestly say they know what the trend is on the weekly and monthly TF, or whether they are counter trend to it, and how many have had a look to see where the move is likely to end....

Some simple analysis and marking down of points.... covered in all the basics of trading books.... if you've got the direction right then the entry is just the fine tuning..

How many keep data? if you told them your win loss was 55%, your risk to reward was 1/1 and you risked 2% per trade... would they consider your strategy worth studying? would they know if youre likely to get a margin call with those figures... or would it be mathematically impossible with those figures ????

Retail traders EA's end up failing because theyre just based on an entry and exit method, I've never seen one that can accurately analyze the higher TF trend and support and resistance... the time it would take an amateur to write it he could of worked out how to trade it manually and be sat on the beach counting his money....

That 95% figure is rediculous as most forums. Rookies learn how to trade start with basics like trading price over moving averages. Don't trade till it can be done on a demo account.

Start with http://forex-strategies-revealed.com/intro. At first do not use indicators. Stay out of forums unless it is a teaching one concerning basics.
Do not read Forum/Trading Systems types. It will cloud the picture.

The site listed is only one of many. If you like all the Bells and Whistles you will waste $$ and time. If your object is to make $$ eventually then start with a couple different basic systems and watch them grow on a demo account. Use Forums to inquire about the best Brokers to open with when ready to deposit cash. Read about $$ management and use it in demo trading so you'll be ready for Prime Time.

If you start with a Basic System the Law of Probabilities will win the day for you if you rigidly stick to it's rules.

Probably one of the most illusive of all skills.

Even a great trader can get wiped out without proper money management.

You can have 99 out of 100 trades win, but if you are risking half your account on that 1 losing trade, you just wiped out half your account, but you're still a great trader.

As you get better as a trader you will start to want to put on more size and will have more confidence and this is where the trouble begins.

You still have to trade with an amount that is reasonable considering the size of your account.

Market is unpredictable. You can read a lot of forex books, enter many cources, learn all strategies of trading. And even after all analysis you make the price can go the "wrong" trend. It seems like somebody controlls all this.

Interesting post, Pierre. Those are some good points. Back in 2002 when I started trading, here are the reasons why I initially failed:

Firstly, trading back then was a bit different than today. It was much newer and "clunkier." Many of the tools I use today had not even been developed yet. Forget about trading directly from the chart. It didn't exist--at least on the platform I was using. There also wasn't such thing as a "micro lot" so I had to risk much more than I would today. None of these are reasons why I failed, but I hope they provide some context for what happened next.

Here are the reasons why my initial investment was completely and utterly lost:

1. Inexperience/FALSE Experience/OVERconfidence. I, like just about everyone else has done, opened a demo account with $50,000 and became pretty skilled at snagging demo pips. It was a completely unrealistic environment for me to trade in, and the money just seemed to grow and grow, bolstering my overconfidence. I read every article I could get my hands on about this technique or that indicator--and I felt like I was learning a lot. Finally I ponied up and put $1000 into a real account, and was sure I'd have doubled my money in one night. What I didn't realize, however, was that I was actually a complete Forex idiot. I was mentally crippled by my experience using $50k in fake money.

Even after having read pages and pages of instruction on trading technique, one BIG thing I had somehow missed was gaining a comprehension of leverage, margin, and margin calls. I knew the terms, and I loosely knew what they meant, but I didn't really understand how they worked. With $50k in my demo account, I never once had a margin call on the lots I was trading, so it was a non-issue for me. I was able to set my stops where I thought they needed to be, and ride out the hiccups in the market movement without much problem. In the REAL world, with only $1000 on hand and NO micro lots, margin calls become a HUGE issue, depending on your leverage. I was placing trades with confidence, only to have them decimated by unexpected margin calls. That is how I lost the first 50% of my initial $1000 investment.

2. Emotional Trading / Panic Instinct - This is a huge problem, as stated in the original post. For me, I had just lost more money than I had ever lost in my life (up to that point, at least. Anyone remember 2008?) I went into panic mode. I needed to recoup my little nest egg so I could continue my grand scheme of making thousands of dollars in the Forex market, right? In order to recoup that lost money, it made sense that I needed to up the ante, and trade much more aggressively. Trying harder means more income, right? Heh. So that is how I lost another 40% of my initial investment. Left with about $100 after one night of trading, I did the first smart thing of my FX Trading career. I stepped away. I needed time to cool off, and get perspective.

3. Lack of Confidence in Instincts - Eventually, things changed, and my account became a micro account. Over the course of a few years, I continued to trade. I didn't put more money into my account, and just used the remaining $100 to gain experience. I had plenty of good trades, but I also had a few really bad trades. Ultimately my account was only shrinking. I didn't trust my judgment, and I found myself constantly relying on every indicator I could get my hands on. At one point I was using a strategy of doing exactly the opposite of what my instincts told me to do. If I thought I should sell, I would buy. If I thought I should keep a trade open, I would close it. By the time I had only $20 left in my account, it was INCREDIBLY difficult to avoid margin calls, but it also trained me to be MUCH more discriminative of the trades I entered into. Eventually, my account reached $0, and I was done. My experience, however, turned out to be incredibly useful in the future.

I switched my focus to stocks and mutual funds, and I put about $40k into that in 2007. When the crap hit the fan in 2008, I had the technical analysis experience enough to know that the market still had a LONG way to drop, and I liquidated my investments. I studied the charts and recognized a bottom, and watched for naked signals that the market would bounce. (I had long since given up on "indicators" and second or third party outlooks. When most people were panicking and scrambling to get OUT of the market, my experience told me that it was the best place to get IN. It turned out that I was right on the money, and I recouped most of my investment by early 2010. I pulled that all out and put it into real estate while rates and prices were rock bottom for my area. Again, another good choice. Bottom line, I have much more trust in my instincts now, although I have a much more cautious and jaded attitude. I think the two go hand in hand.

Anyhow, I'm back in FX trading. I'm no pro by any means, but I turn a consistent profit now, snagging a modest 10-30 pips a day or so--on the days that I trade.

Jake (leerafel)

This is the absolutely correct answer.
I think the first step is to understand what we are doing? The more we understand, the better chance we can make good decision. Like trend trading, if we don't know what it is, usually, we will lose. In other word, understand deeply about forex may increase chance to win in this investment channel. Personally, I think beginners may want to read this books. Good content, easy to read, and understand.

Peter, respectfully, let me address some of the issues you mentioned:
1. "Market is unpredictable"-- If that is the case, then don't trade that market. Move on to some else that yields a higher confidence ratio for your entry criteria.
2. "read a lot of forex books, enter many cources"--Quit reading the books and blowing your money on courses. The ones offering the courses and selling the books are doing it for one reason. Because they are excellent traders? Wrong! To make profit from the courses and books. It's simpler and quicker to punch buy or sell on your platform than write a bunch of books and set up for trading courses.
3. "learn all strategies of trading"-- Don't try to learn them all. Learn noly one that fits your personality the best.
4. "after all analysis you make the price can go the "wrong" trend"-- Is that the trend's fault or the trader's fault?
5. "It seems like somebody controlls all this."-- You have 100's of brokers. It's a worldwide business. Do you actually want to believe one person controls it all?

DAvey, that is why the great traders practice money management. This is also why their last dime is not in the markets.
People put added pressure on themselves, because they want to make it big all at one time. They don't want to be patient and grow their account methodically. It also does not help when the new people read all these claims like, "Turn $100 into $1 million in one year."
Successful trading is a process. It entails properly developing a methodology to trade by and the money management skills to go with the methodology. After someone is in the markets live, it necessitates proper mental discipline to not let fear or greed have their day.
It's that simple. OTOH, it is not that simple.

I think the main reason is that people think they can enter a market and ready ... believe it is easy and that from one day to another can be a trader, to succeed takes time analyzing markets and in particular by developing a system that functions for them because if a system works for me does not imply that works for all other persons

I think the trader fail cause everybody thinks that he can be a trader but it is not true. to be the trader means to be the great analyst

Every good trader is a good analysts , but not every good analyst is good trader.. as trading demands analysis and risk management both (plus a control over the nerves, specially when you see huge loss or profit ;-)

Man! The last 3 posts from the new guys of the forum is just nailing it! You guys go out and recruit some more people just like you.

Let me add: Many good analysts do not know how to trade, which is why they sell their wherewithals on the internet. Trading requires a different mental focus than analyzing.

very very well said!!!

The 95% losers are not on this thread presently, they are in the TRADING SYSTEM thread looking for the grail!

I met a guy on this same forum today who was complaining about a broker and i probed further and found out that He just started trading 3 months ago and he presently has 2 live accounts he's trading. I tried to advise him about the folly of jumping into live trading with little 'or in his case' no experience at all, Guess what He said gave him the confidence to start trading live, A few years trading stocks and his degree in economics!!! It was freaking Hilarious! I laughed so hard and got my coffee all over my damn laptop, now i gat to mop it all off

Anywayz, I wished him all the best of luck and asked him to strap his seat belt, cause its sure gonna be a hell of a bumpy ride!!!

Everybody just start digging into various trading strategies without any knowledge of the market and its purpose in first place. Of course it is more easy to get some technical analysis books, learn to draw a trend line, take a look at some patterns and indicators and get to it. This is so true when it comes to retail FX marketing these days, you can get a view of a easy way to make a living trading - put few bucks on 1:500 leverage and reach for the stars.
The fact is that financial markets and exchanges by they nature are created to take, not to give. They main purpose is to provide liquidity for the participants whenever they need it, and therefore there is a cost for it.
Market will always go against its customers because it just can't be different way for it to exist ...

It is very interesting in all the reasons each trader had come up with on failure - but no-one had really hit the true reason why 95% of traders fail.

All the reasons stated above is known as "baggage" in which everyone carries to one extent or another - and in time - the baggage can be dissolved once one had recognized their own baggage. So lets talk about the true reason why everyone fails and that is wisdom and knowledge.

Wisdom and knowledge of the "Primary Source" that makes this market what it is and that is "Support" and "Resistance". And I am not talking about lines that are drawn for highs/lows, pivots, or fibo; wedges or pyramids - or anything else that is being taught in regards to support and resistance. But the understanding of the "Moving Paradox" of support and resistance; which is also known as the "Holy Grail". This market is about balance just like everything else in life. And if you can not recognize the imbalances then you are doomed and will become a failure.

The moving paradox is found in indicators - not just any kind of indicators but the proper use of the right indicators. Let no-one tell you that you can be a trader in a few days, or a few weeks, or even a few months - if they do - then they are lying to you. To become successful in this business it would take years of training just as it would take years to obtain a masters degree in college. And if you do not have that kind of patience then it is time to leave and never return because if you don't - then you will loose everything you own. And my fellow traders - that is the truth.

Without Knowledge - and the right knowledge - you will never make it as one of the Elite with wisdom.