The Real Reason Traders Fail

[maler]

My 2c:

1. lack of edge; this includes starting with a viable edge which temporarily no longer works in the current market environment, or has been priced in by the market and will never work again.

2. poor risk management skills; even if you have a viable edge, if you do not have risk management skills you will fail; the math involved here is not rocket science

3 inadequate psychological makeup; doing the right thing when you are going through a tough streak; appears easy in hindsight, but it is difficult to do in real time.

 

[wxytrader]

Reasons for Failure:

- excessive leverage
- lack of insight (markets/screen time)
- catastrophic loss/trade (not using stops or inappropriate stops)
- personal life in turmoil
- not seeing both sides of the trade at any given time
- lack of systematic edge
- day trading is different from investing (daytraders rarely carry inventory session to session)

The use of stop losses.
Day trading.

 

[Handle123]

Humans learn to trade from birth, start crying and mama gives them milk. Go to a flea market and haggle price.

Stop thinking about becoming rich, people who dream seldom conquer. Let money become a score.

 

[Actuarial_Fun]

The real reason traders fail? Because they have no edge. It's that simple. You have to beat commissions, bid/ask spread,and the cost of borrowing to just break even, let alone beat the S&P on a risk adjusted basis (good luck). If you are a futures trader, add up the commission, the spread, the cost of borrowing (yes, futures arn't free), and see what you are up against to breakeven. You need an edge and it has been increasingly difficult to get an edge with HFT, ML, algos, etc.

There's all this weird emphasis on psychology. Sure, if you have an edge (which few people actually do) and then you blow up mentally you have 0% chance. So... you need to have an edge (again very difficult these days) AND beat S&P on risk adjusted basis by having a good edge and then not mentally falter. Cost it the hours of doing business verse passive trading.... Good luck.

It's so hard to know if you have an edge too. When people's systems work or make money they think it's good, when it loses money and has drawdowns, they question it, but there is SO SO much variance in trading that it could take you years to determine if you actually have an edge, unless you clearly have no edge to begin with. Back in Pokerstars days I got dealt AA verse KK say 20 times and lost 18. 0% probability, but it happened. In poker you can at least measure facts (e.g. how much I should have won) in trading you don't have this. It's so hard to have an edge and it's so hard to know if you actually have one after even years of trading, in some instances.

I have trading systems I like that have been unprofitable in 80% of trades over the past 5 years. I think the system is still sound, just not running well. I have trading systems that have won 80% of the time that I think I should toss. So so difficult. I think we need to talk more about actually edge and less about psychology, because all the meditation in the world won't fix that lack of edge.

 

[hilmy83]

The real reason traders fail? Because they have no edge. It's that simple. You have to beat commissions, bid/ask spread,and the cost of borrowing to just break even, let alone beat the S&P on a risk adjusted basis (good luck). If you are a futures trader, add up the commission, the spread, the cost of borrowing (yes, futures arn't free), and see what you are up against to breakeven. You need an edge and it has been increasingly difficult to get an edge with HFT, ML, algos, etc.

There's all this weird emphasis on psychology. Sure, if you have an edge (which few people actually do) and then you blow up mentally you have 0% chance. So... you need to have an edge (again very difficult these days) AND beat S&P on risk adjusted basis by having a good edge and then not mentally falter. Cost it the hours of doing business verse passive trading.... Good luck.

It's so hard to know if you have an edge too. When people's systems work or make money they think it's good, when it loses money and has drawdowns, they question it, but there is SO SO much variance in trading that it could take you years to determine if you actually have an edge, unless you clearly have no edge to begin with. Back in Pokerstars days I got dealt AA verse KK say 20 times and lost 18. 0% probability, but it happened. In poker you can at least measure facts (e.g. how much I should have won) in trading you don't have this. It's so hard to have an edge and it's so hard to know if you actually have one after even years of trading, in some instances.

I have trading systems I like that have been unprofitable in 80% of trades over the past 5 years. I think the system is still sound, just not running well. I have trading systems that have won 80% of the time that I think I should toss. So so difficult. I think we need to talk more about actually edge and less about psychology, because all the meditation in the world won't fix that lack of edge.

Do you think it's possible for day traders to net a profit everyday?

 

[Actuarial_Fun]

Do you think it's possible for day traders to net a profit everyday?

Everyday? No, I think that would be absolutely impossible. I think every year is extraordinarily hard (over say 10+ years), let alone every month, week, or day.

 

[traider]

The real reason traders fail? Because they have no edge. It's that simple. You have to beat commissions, bid/ask spread,and the cost of borrowing to just break even, let alone beat the S&P on a risk adjusted basis (good luck). If you are a futures trader, add up the commission, the spread, the cost of borrowing (yes, futures arn't free), and see what you are up against to breakeven. You need an edge and it has been increasingly difficult to get an edge with HFT, ML, algos, etc.

There's all this weird emphasis on psychology. Sure, if you have an edge (which few people actually do) and then you blow up mentally you have 0% chance. So... you need to have an edge (again very difficult these days) AND beat S&P on risk adjusted basis by having a good edge and then not mentally falter. Cost it the hours of doing business verse passive trading.... Good luck.

It's so hard to know if you have an edge too. When people's systems work or make money they think it's good, when it loses money and has drawdowns, they question it, but there is SO SO much variance in trading that it could take you years to determine if you actually have an edge, unless you clearly have no edge to begin with. Back in Pokerstars days I got dealt AA verse KK say 20 times and lost 18. 0% probability, but it happened. In poker you can at least measure facts (e.g. how much I should have won) in trading you don't have this. It's so hard to have an edge and it's so hard to know if you actually have one after even years of trading, in some instances.

I have trading systems I like that have been unprofitable in 80% of trades over the past 5 years. I think the system is still sound, just not running well. I have trading systems that have won 80% of the time that I think I should toss. So so difficult. I think we need to talk more about actually edge and less about psychology, because all the meditation in the world won't fix that lack of edge.

What is the edge in your trading system?

 

[Danish Kumar]

i guess i will use this thread as a guidance for me as i am a new beginner and these reasons will be so beneficial for me to avoid those mistakes

 

[deaddog]

i guess i will use this thread as a guidance for me as i am a new beginner and these reasons will be so beneficial for me to avoid those mistakes

Exactly!!
I have often suggested that new traders study why traders fail, then don't do any of that stuff.

 

[Nighthawk]

EGO.