Why do traders fail?

Visaria said:
If you don't work hard, you will not make it as a trader. Period
More...

this is not entirely correct.

the reason traders lose money is because they do not recognize the trend change signal.

traders naturally look for trend but they are taught wait for pull back to buy so when the change in direction comes, which has the same characteristics as a pullback, they buy.

this is where the rub is.

knowing the direction is easy but you should also get the buy or sell signal...….this losing traders do not recognize......the buy or sell signal is the critical part, the tiny difference between getting a Ferrari or getting starved
 
what I am trying to say that the you have to be aware of both the bull and bear and keep changing your stance according to where the market is in relation to the bull stronghold and to the bear strong hold.
if you think market is bullish but have no idea where it will get bearish then it is major reason for you to lose money. that is why they say you can only make money 60% of the time; these do not know when bull becomes bear.
sometimes the market does change from bull to bear and then from bear to bull very quickly so the trader will get whip sawed. but eventually after 2-3 whipsaws it resolves and then the trader is back on track.
I know this may make little sense because it may be a bad explanation and I am sorry for that but I cannot do it any better.
it is clear in my mind.....
 
ChrisDouthit said:
There is an unlimited number of reasons why traders fail. In many cases because they jump in the something before they have all the facts, or just don't feel like doing the research. Other times it could be the market turns around for no reason.

Then there's news it comes out that no one can foresee, I put on a trade in Chipotle the day before all those food poisoning issues came out, how could I see that coming?

Another trader I know was into Apple when Steve Jobs announced his retirement, some things you just can't account for.
More...

Sure, but you do control maximum risk you take on. If you don't take on too much, you live to trade another day (without a personal bankruptcy in between). A trader shouldn't "fail" on the kind of events you describe, unless their objective is to do some serious gambling with associated likely early demise.
 
https://en.wikipedia.org/wiki/El_Farol_Bar_problem

IMO it is actually a first principal of the market that most have to fail at trading in order for a small minority to gain a large profit. This is exactly what motivates trading to start with. If profit is uniformly distributed there would be basically no reason to trade to start with.

A side effect of this first principal is most strategies and thought on the market also has to mostly be wrong.
 
It takes years and thousands of hours and lots of lost money to become consistent.

How many are going to perservere the 3-5 year learning period, where you are a net loser. It costs you money, time AND sanity. Very few people can actually afford this and even then, not everyone is willing to make the sacrifices.

You can list things such as greed, gambling and what not... But c'mon, we all know that's pure bull*hit. We only learn through mistakes and experience, and i bet everyone does the same mistakes in the beginning. You will be greedy, you will gamble and it will take a while before you realize that it's not going to work.
 
it is generally assumed that if you know market direction then you can make money lots of it.

and market direction is obvious.

so the first trades anyone makes money is made.

and the conclusion is reached....this is easy.....

then it is very well known what happens.

beginners trade trends.......the great traders trade trend failures

when a trend fails, all those who are with the trend , have to align with the new trend and you have everyone-the new traders entering the new trend and the old trend followers reversing their positions entering the new trend,and so the prices moves and fast.

very lucrative.
 
Last edited:
DTB2 said:
Yeah, NO
More...
you think they trade trends?

of course they do!!!

a trend failure is a new trend.

and a new trend has a very small stop.this means you use much bigger position sizes.

and if the stop triggers the position can be reversed again with a very small stop.

i have been trading for 13 years and i have found if you cannot keep your losses small,you will never be a great trader.

if you trade trends, your stop is at the beginning of the trend, which is comparatively huge.

anybody can see these trends,and they enter correctly but use the incorrect stop.

this leads to inconsistency at best or a number of hit stops. this is very bad for your confidence and you start experimenting with different stop placement, all of which are wrong.there is only one correct stop which is huge

Then you think trading is only risk management and that takes you on the wrong and very long arduous, frustrating road.

believe me i have been there.

this of course presupposes that trader can recognise a trend failure......and that is far far far more difficult than recognising a trend

but that is what makes a great trader
 
Last edited:
You must log in or register to reply here.
Back
Top