Why do so many traders lose money?

(This thread is meant to be thought provoking and to generate debate. It is in no way a pre-supposition that people reading this are consistently losing money when trading.)

Ok, here goes. Anyone can devise a random set of trading rules and then backtest them. Some systems may be profitable in the past and then become unprofitable in the future, or vice versa. In other words, any system will make money at some point - no system always, consistently loses money forever (because if it did, the exact opposite system would always make money, and that doesn't exist).

The statistic I hear is that 90 pct of traders lose money. Ok, if that is true, what are they all CONSISTENTLY doing that causes them to lose money (ignore commissions and bid/ask).

Are there basic human traits that cause people to trade poorly? If so, can they be specifically identified, and thus all that is then needed is to avoid making these mistakes? For example, could you tell a rookie trader "don't do x, y and z" and that would ensure they go on to be profitable over time?

I have my own thoughts on where things go wrong, but am interested to hear others peoples ideas.

greed and fear?

Yup

They don't have the balls to do what they know is right.

Failing to stick to targets set before a trade is made. Many reasons for this like fear and greed but also things like the need to be right or desperation.

And price levels, price and volume patterns at which greed and fear are likely to occur are known and manipulated by the remaining 10%-20%

Charlton

because they're not traders, they're simply part time fantasists.

not prepared

not prepared

not prepared

put what you like after not prepared, makes no difference


Andy