Why are there so many losers?

A

AshanD

Hey guys, after browsing around I see that the large majority of traders end up net losers (95%+) This sounds incredibly high, are we counting only daytraders or all types of investors in that number? I would think the number "should" be around 75-80% are net losers.

Whatever the number, I want to be on the side that wins so its necessary to know why the other side loses.

Is it because
-They aim too high? Trying to make 1000% a year as a daytrader

-They lack proper knowledge and play the game at a severe disadvantage

-Improper bankroll management, trading too large relative to account size

Right now I fit all 3 of those categories, my goal is to make enough trading to pay all the bills which I'd estimate to be around $1,500 a month. With only $5,000 to start that goal is entirely unreasonable (for now at least) I hope to hear other common trading pitfalls so I will (hopefully) avoid them and learn to trade as cheaply as possible.

Thanks
 
I think the number is higher than 95% over the long run. I had absolutely no idea of how difficult it is. I really do not think anything can clue you in other than investing several thousand dollars to find out. My advice is to find the lowest costs possible while learning and see if you can hang in there long enough to eliminate the mistakes.
 
Well, not having a solid plan can do it to you. I backtested a system and got some very nice results. It is for automation and it watches quite a few issues. The results were great so I put it in motion and it starts off losing $. I can't believe it but on a closer look I see that I got my best gains in backtesting on some illiquid issues and the losers were capable of soaking up all kinds of capital, and they did!!
 
Maybe if you meant you could afford to lose $1500/mo for 2-3 years, you might learn something, but *earn* money? Why should any idiot off the street be able to just start making money as if it just *grows* on Wall St. This game has always been hard and has gotten more difficult in last few mos.
My advice....walk away unless you really want to belong in that 95% camp.


Quote from AshanD:


Right now I fit all 3 of those categories, my goal is to make enough trading to pay all the bills which I'd estimate to be around $1,500 a month. With only $5,000 to start that goal is entirely unreasonable (for now at least) I hope to hear other common trading pitfalls so I will (hopefully) avoid them and learn to trade as cheaply as possible.

Thanks
More...
 
There have been numerous studies that show that 5-10% of traders make enough money to be worth doing it. I suspect the real number is under 2%. But that figure is not as bad as it sounds. The failure rate for all business startups is nearly that bad. I think more people try trading because it looks so easy and can be tried with so little starting capital, and that drags down the success rate somewhat. Only a small portion of startup traders really make the commitment it takes to succeed. The most common cause of failure for all business startups, trading included, is lack of ability. Here again the startup trader has a disadvantage because of the many people providing training and the generally poor quality of that training.

From a psychological perspective, successful trading is difficult because of the poor feedback and intermittent reinforcement. Trading well requires the trader to do things that are very unnatural.
 
Maybe if you meant you could afford to lose $1500/mo for 2-3 years, you might learn something, but *earn* money? Why should any idiot off the street be able to just start making money as if it just *grows* on Wall St. This game has always been hard and has gotten more difficult in last few mos.
My advice....walk away unless you really want to belong in that 95% camp.
More...

That's my long term goal I certainly don't expect to just put money into the market and earn $1500 a month. As far as it getting harder, care to elaborate?
 
Quote from AshanD:

-They aim too high? Trying to make 1000% a year as a daytrader

-They lack proper knowledge and play the game at a severe disadvantage

-Improper bankroll management, trading too large relative to account size

Right now I fit all 3 of those categories, my goal is to make enough trading to pay all the bills which I'd estimate to be around $1,500 a month.
More...

Knowing the fundamentals of why people are not successfully in this business is no where near relevant in understanding what it takes to be successful. At first glance this business seem's some what manageable, but to become profitable and beat the odds it takes more than just dedication and knowledge, it takes time and patience, and only when you have reached your full potential in this business is when you will find out if you can make it. So don't ponder if it's possible, take the risk and try it. If you fail, at least you gave it a shot.

Good luck
 
If only 2% of the people make real money doing it, this means you have to be better than other 98%, I never been better that other 98% in anything I've done so far. So maybe I should reconsider my decision to start day trading (I havn't started yet). I am glad I came accross this thread early. Maybe I am wuss.
 
Quote from rwk:

There have been numerous studies that show that 5-10% of traders make enough money to be worth doing it.
More...

People are always talking about these studies, but where could I find these studies? :confused:
 
I believe this statistic comes from retail account
with introducing brokers only, the figure so be
higher than this, because most successful and
large volume traders trade directly with clearing
firms or on the floor.

Otherwise what chance you have to make it
among that 5%, if 5% only? Ask yourself this
question?

I will quite daytrading today, if someone can
prove to me (reliable source with data) that it's 5%
that make money over long term?
 
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