Why do traders fail?

Quote from Jason Rogers:

Good hunting!

Jason
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There is something in this data that is overlooked I think. I would suggest that traders generally hold on to the trade for too long, winning or losing.

Since march, I have a win rate on the EUR/USD of 100%. I haven't lost a single trade. However, in every case I have watched as the trade goes against me substantially before becoming a trade which I then exit in my favor. Now, what if it goes against me indefinitely never bouncing back in my favor? Do I hang on for a loss which is substantially greater than all of my wins? In other words, despite my positive trade percentage, did I ever correctly select the right trade or was I just stubborn and hung on long enough until it ended in my favor?

This begs the question: when looking at your data, is the positive trade rate of 55% on the EUR/USD a true representation of what the trader has actually selected? Are they in fact guilty of selecting the wrong trade far more than 45% AND failing to exit quickly when the realize it was the wrong trade?
 
In other words can I really call it a winning trade if I say, "Hey I hope this goes in my favor in the short term, but if it doesn't I'll hang on to the trade until it does go in my favor?" This is by the way a very effective way to get a positive trade ratio until of course the trade goes badly against you and cleans you out.
 
Quote from Jason Rogers:

Hi Tradester,

Poor risk management is a major factor that prevents traders from being profitable. For example, the chart below shows the results of a data set of over 12 million real trades conducted by FXCM clients worldwide in 2009 and 2010. It shows the 15 most popular currency pairs that clients trade.

What_is_the_Number_One_Mistake_Forex_Traders_Make_body_percent_trade_profitable.png


The blue bar shows the percentage of trades that ended with a profit for the client. Red shows the percentage of trades that ended in loss. For example, in EUR/USD, the most popular currency pair, FXCM clients in the sample were profitable on 59% of their trades, and lost on 41% of their trades.

So if traders tend to be right more than half the time, what are they doing wrong?

What_is_the_Number_One_Mistake_Forex_Traders_Make_body_trade_pips.png


The above chart explains it. In blue, it shows the average number of pips traders earned on profitable trades. In red, it shows the average number of pips lost in losing trades. We can now clearly see why traders lose money despite being right more than half the time. They lose more money on their losing trades than they make on their winning trades.

Let’s use EUR/USD as an example. We know that EUR/USD trades were profitable 59% of the time, but trader losses on EUR/USD were an average of 127 pips while profits were only an average of 65 pips. While traders were correct more than half the time, they lost nearly twice as much on their losing trades as they won on winning trades losing money overall.

The track record for the volatile GBP/JPY pair was even worse. Traders were right an impressive 66% of the time in GBP/JPY – that’s twice as many successful trades as unsuccessful ones. However, traders overall lost money in GBP/JPY because they made an average of only 52 pips on winning trades, while losing more than twice that – an average 122 pips – on losing trades.

That data above are from a series of studies into trader profitability conducted by the analysts at DailyFX. I hope you'll find the information useful for your project.

Good hunting!

Jason
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Interesting !
 
the NO.1 reason is: they are too eager to make money .

the No.2 reason is the same: they lack of patience

wealth build needs several steps:

first one: small/gradual. few lucky ones may make overnight rag to rich but rare!

then after a while, you are stong enough to endure any turbance since you do not need that money for living. you can makelots of mistake, but that will not hurt you any more.

from there, expolive growth,exponetional....

the hardest is the first step, since you just have little money, little experience, ... one mistake, you are dead.

plan each trade
almost make sure each is 100% right.

actually it is very easy to realzie those two goals: be patient.

wait there until themoment comes,then all in!
 
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