Why Do Traders Lose? Part-I

Why Do Traders Lose?

This study showed that less than 2% of traders were profitable net of all fees.

In fact:

• 40% of day traders quit within a month
• 87% of traders quit within 3 years
• 93% of traders quit within 5 years

All sorts of reasons are given for it, such as money management,black swan events, poor trading strategy.

It doesn’t seem to matter how many books you buy, how many seminars you attend or how many hours you spend analyzing price charts, you just can’t seem to find a way of being profitable over a long run.

Today we will discuss few mistakes a traders should avoid if they want to be profitable over long run.

 

Not Having a Trading Method

If you aim to be a consistently successful trader, then you must have a defined trading methodology, which is simply a clear and concise way of looking at markets. in Bull market all your Sins are forgotten if you are on BUY side and in Bears market vice versa, But when market trend change traders who do not have methodology lose out the most.  Guessing or going by gut instinct won’t work over the long run. If you don’t have a defined trading methodology, You are gambling. Its like Driving a car without having BRAKE, eventually you will meet a fatal accident.

As a Trader you should have well define trading method which should be simple to understand. DO remember market will test you at times test your conviction on your strategy by whipsawing you. But traders who take the hard knock of market and stay put comes out with flying color. Learn,Master, Expertise your trading strategy.  There are 1000’s of trading system available in but you need to find which suits your trading personality.

 

Lack of Discipline
When you have clearly outlined and identified your trading methodology, then you must have the discipline to follow your system. Lack of Discipline is one of the major reason why trader lose. Always remember its Just 1 bad trade which can blow off your trading account. Looks at the way Arvind Adani moved in single session, If you just fail to put SL thinking its one of the trade you can create a big dent in you trading account.The formula for success is to consistently apply a proven methodology.

 

Unrealistic Expectations

Most of traders i interact  have 1 thing in common they are attracted towards trading in Options as its moves and multiplies very fast but most of traders do not understand the pitfall as it can easily blow their trading account. Most of traders do not talk less than 50-60% under normal circumstances and 100-200%  (time frame i will leave to readers imagination) basis during the Bull run.  Such kind of unrealistic expectations forces traders to take extra risk which lead to trading account blow off.

WD Gann Quote remains apt till today

If traders would only learn to watch and wait they could make lot of money buy they are in too big a hurry to get rich and as a result they go broke.

In my opinion, the goal for every trader their first year out should be not to lose money If you can manage that, then in year two, make between 15-20% by the end of year. These goals may not be flashy but they are realistic, and if you can learn to live with them — and achieve them — you will become a successful trader in long run.