Why do so many traders lose money?

[cuotes]

The following text is long and boring. I know :|
Anyway I strongly recommend you to read it and please... take a minute to think about it!!!


Many things have been pointed out in this thread.
Most of them (maybe ALL of them) are true.

This topic is of vital importance since it is the fact of making or not making money what determine in the long haul wether you are successful or not.

This job (because trading is a job, believe it or not) is different from others. In contrast to other jobs, here it is not about style, renown, fame, image, contacts, social networking or whatever.

It's a matter of MAKING MONEY OR NOT.

Let's have a look on reasons and causes already pointed. If you think of it, the most of them can be separated in two big areas.

1. Lack of seriousness and professionalism. As I stated before, this is a job, not a hobby. You're here in order to make money. Hobbies COST money.

2. Lack of a good fit between the trader and the environment.

The last one is such a terribly huge issue... that nobody pays attention to it. I strongly encourage you to stop for a minute and think of it.

Are you trading in the market segment that best suit to you???? PROBABLY NOT, otherwise you wouldn't be losing money.

Maybe you are in a market that is too much fast for you, or your leverage level is too high for you, or maybe you are using a product not suitable for you (futures are not for everybody), or perhaps the problem is that you are working with a timeframe too long or too short for you.

Some people I know trade ES or YM futures because it sounds good. It sounds professional. It sound like you playing in the big league. You look yourself fighting against the greatest pros. And that make you feel good. And moreover, you do scalping because it sounds awesome, technically advanced and make you feel over the standard citizen. You feel powerful.

And you loss money again and again.

Have you ever thought that you could make a killing trading Wheat Options?
How do you know that you are not the king of Silver futures?
And... if you stop scalping and begin to swing NQ? (keep positions for a couple of days)

My advice:
Try different markets, with different products and different timeframes

Maybe your problem is simply that you are in the wrong place.
Just move to other place!!!!

 

[ian23]

very sound advise

The following text is long and boring. I know :|
Anyway I strongly recommend you to read it and please... take a minute to think about it!!!


Many things have been pointed out in this thread.
Most of them (maybe ALL of them) are true.

This topic is of vital importance since it is the fact of making or not making money what determine in the long haul wether you are successful or not.

This job (because trading is a job, believe it or not) is different from others. In contrast to other jobs, here it is not about style, renown, fame, image, contacts, social networking or whatever.

It's a matter of MAKING MONEY OR NOT.

Let's have a look on reasons and causes already pointed. If you think of it, the most of them can be separated in two big areas.

1. Lack of seriousness and professionalism. As I stated before, this is a job, not a hobby. You're here in order to make money. Hobbies COST money.

2. Lack of a good fit between the trader and the environment.

The last one is such a terribly huge issue... that nobody pays attention to it. I strongly encourage you to stop for a minute and think of it.

Are you trading in the market segment that best suit to you???? PROBABLY NOT, otherwise you wouldn't be losing money.

Maybe you are in a market that is too much fast for you, or your leverage level is too high for you, or maybe you are using a product not suitable for you (futures are not for everybody), or perhaps the problem is that you are working with a timeframe too long or too short for you.

Some people I know trade ES or YM futures because it sounds good. It sounds professional. It sound like you playing in the big league. You look yourself fighting against the greatest pros. And that make you feel good. And moreover, you do scalping because it sounds awesome, technically advanced and make you feel over the standard citizen. You feel powerful.

And you loss money again and again.

Have you ever thought that you could make a killing trading Wheat Options?
How do you know that you are not the king of Silver futures?
And... if you stop scalping and begin to swing NQ? (keep positions for a couple of days)

My advice:
Try different markets, with different products and different timeframes

Maybe your problem is simply that you are in the wrong place.
Just move to other place!!!!

I began trading with penny stocks with the idea that with a limited account it would be imposible to work with the more highly traded stock. After many losses i moved on to trade warrants and then finally i ended up in trading futures. I wasn't profitable until i traded wave warrants and futures purely because i have no patience to sit and wait for some weeks for things to move.

 

[tar]

because they should lose

 

[anley]

Because they never realise just how hard it is to make money, over time that is. Any one can get lucky for a few days/weeks/years.....

 

[Captain Currency]

More reasons on this t2w thread


Andy

 

[BSD]

Net losers want to be right far more than they want to make money because they cannot handle losing as the inevitable and ineradicable cost of doing business as a trader that it simply is.

TWI, who started at a prop firm and is at a hedge fund now explained it perfectly:

"The success does not seem to lie in the method so much as the discipline. I think the most common thing I have seen is for inexperienced traders to lose discipline when thier "bulletproof" method has a few consecutve losses. No matter how much testing and paper trading and pledges to stick to it occured before, real losses can really throw all that into the dustbin and so begins the path to failure."

 

[everyonerich]

people lose because not trading the actual movement of the market, they're trading their own opinions.

your are the source of your experience in the markets because your decisions about life colors your thoughts, your imagination, your emotions and your actions. There is lots of profit in the market and the part that you experience is a result of your opinions about it.

 

[Dinos]

Maybe trading against the trend, killed me in the beginning (twice), then learnt trend is the friend etc.

Listening to to many differing opinions on BB's and not trading their plan.

 

[Captain Currency]

TWI, who started at a prop firm and is at a hedge fund now explained it perfectly:

"The success does not seem to lie in the method so much as the discipline. I think the most common thing I have seen is for inexperienced traders to lose discipline when thier "bulletproof" method has a few consecutve losses. No matter how much testing and paper trading and pledges to stick to it occured before, real losses can really throw all that into the dustbin and so begins the path to failure."

Hello Markus,

Having an edge, a system/strategy/style with a positive expectance is number 1 when it comes to succeeding in the market. If you haven't got an edge you cant win long term.
You actually need a bit of an edge to just breakeven in this market after you take into account the brokers spread, so not suprising that 90% lose rather than it been 50% winners and 50% losers.

If an inexperienced "trader" happened to find a system/strategy/style with a positive expectancy he will more then likely start moaning and system hopping after he sees a string of losers because he never took the time to work out the probabilities of the system seeing atleast X amount of consecutive losers.

 

[BSD]

Hi Andy, oh yes, I completely agree with that.

What I meant was peoples ability or rather inability to actually stick with their method that has an edge, albeit only over time, only in the long run.

I totally agree: you need a strategy with an edge, but then you need to give that edge the opportunity to work over time, and not cut it short by exiting strategies when they encounter a couple of losing trades and right away going on a never ending search for the next best thing, which is I suspect what most net losers do, always looking for a 100% hit rate holy grail, hehe, and thereby never giving their method the long term breathing room it needs to be net profitable.

Sort of like a Casino that'd change it's systems every time a gambler wins the jackpot, eh.



Have a good weekend mate.

 

[Claudia123]

Hi Andy, oh yes, I completely agree with that.

What I meant was peoples ability or rather inability to actually stick with their method that has an edge, albeit only over time, only in the long run.

I totally agree: you need a strategy with an edge, but then you need to give that edge the opportunity to work over time, and not cut it short by exiting strategies when they encounter a couple of losing trades and right away going on a never ending search for the next best thing, which is I suspect what most net losers do, always looking for a 100% hit rate holy grail, hehe, and thereby never giving their method the long term breathing room it needs to be net profitable.

Sort of like a Casino that'd change it's systems every time a gambler wins the jackpot, eh.



Have a good weekend mate.

Hey BSD they banned your friend. Very funny.

 

[cuotes]

Still I insist...

No edge/strategy will be profitable for you if it doesn't match your personality.

You NEED to feel not only confident, but comfortable with your approach.

If you're an action man, long term spreads are not for you.
If you're a methodical, rational, think-twice investor, not even the best scalping strategy over the world will give you any money.

Trading is more psychological than people think.

 

[uexkuell]

Most postings here focus on the mistakes people might make.


Just to add another flavour:

What if it is not that loosing traders are making some particular mistakes but others know how to hit them and exploit that to make money?

A relationship like plankton and whales.
Whales know where the plankton is gathering. They just go there and open their mouth.
(No real fault on the side of plankton.)

 

[arabianights]

Most of you apart from Captain Currency, Black Swan and BSD are ****ing idiots.

I'm telling you, it really is as simple as most 'traders', especially in a t2w/retail context, are trading noise.

And whenever they do that they're paying to do ti.

IT REALLY IS THAT SIMPLE

 

[cuotes]

Most of you apart from Captain Currency, Black Swan and BSD are ****ing idiots.

Thanks,so kind of you. Now I feel much better

I'm trying to emphasize the need to do something that fits your personality traits,in order to eventually avoid chasing noise.

Moreover, If you can make a living trading noise, I don't see the problem.

 

[tar]

Thanks,so kind of you. Now I feel much better

I'm trying to emphasize the need to do something that fits your personality traits,in order to eventually avoid chasing noise.

Moreover, If you can make a living trading noise, I don't see the problem.

If u have a system and u trade noise successfully then this is not a problem , but the problem is when some guys pay 3 pips on spread for Cable to take 2 pips profit !

 

[cuotes]

Several posts ago, I pointed out two main causes that I reckon could explain why so many of us keep losing money.

1. technical issues. Lack of seriousness and professionalism. As I stated before, this is a job, not a hobby. You're here in order to make money. Hobbies COST money.

2. psychological issues. Lack of a good fit between the trader and the environment.

The "noise problem" could be included in the first set.

With my posts in this thread I just wanted to draw your attention to the second point since it seems that people tend to forget it and focuse only on technical obstacles.

Nevertheless, as Arabianights wisely stated, there's no doubt that I'm just a f***ing idiot by doing so. I beg your pardon

 

[bharat]

main reason most traders loose money is because of small trading pot with a big targets in their mind. it takes time to learn and build up a trading pot.

you must have a "%age gain a week" target in your mind.
to begin with say 0.5% to 1% a week if you are a beginner.
once you have enough experience and knowledge increase your target.
for a beginner if you breakeven after 3 months of trading one should be happy.

£1000 trading pot with 1% a week gain is woth 67% gain a year, compounded.

 

[puregold24carat]

My view is if that if you dont have a target , a stop loss , method of entry , money management then you are bound to lose : this is perhaps why most intra- day traders lose , this is why most end of day traders lose .

 

[mrsoul]

(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.

I still insist that the main reason that traders lose is because they have nothing that works consistently over time- it's really that simple.

Find something that works and everything else falls into place. (i.e.- stops, profit targets, discipline, etc.)

Also captain currency makes a great point- don't give up on a winning system if it draws down- realize it is just a statistical occurence and keep trading it.

-Take Whichever Way Works-
Bruce Lee
Jeet Kon Do