As a trader, what keeps me trading is I believe I have an edge. What is that edge? I win 40% of my trades and lose 60% of my trades. My average win size to average loss size is 2 to 1. So, what is the edge? P= (.40)(2)-(.60)(1)= .80-.60 = .20 or I win $0.20 for each $1.00 invested. Now, I am not the best trader here or anywhere for that matter. How much will I earn? Who knows? It does not really matter as long as I make more monies than I lose. I have also, spent monies I earned from the market. To each his own. Sometimes, I get windfall profits like on TWTR put options where I made $2300 in 3 days time. Lost $700 on my calls on RUN. Earned $600 on INTC calls in one week. Where else can I earn that much monies in a short period of time? Why would I stop trading and settle for 15%-20% in one year? My risk is limited to the cost of the options premium. Upside on an uptrend for call options unlimited in theory and limited to zero on the downside for put options.
Why Traders Lose
- Thread starter smallfil
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As a trader, what keeps me trading is I believe I have an edge. What is that edge? I win 40% of my trades and lose 60% of my trades. My average win size to average loss size is 2 to 1. So, what is the edge? P= (.40)(2)-(.60)(1)= .80-.60 = .20 or I win $0.20 for each $1.00 invested. Now, I am not the best trader here or anywhere for that matter. How much will I earn? Who knows? It does not really matter as long as I make more monies than I lose. I have also, spent monies I earned from the market. To each his own. Sometimes, I get windfall profits like on TWTR put options where I made $2300 in 3 days time. Lost $700 on my calls on RUN. Earned $600 on INTC calls in one week. Where else can I earn that much monies in a short period of time? Why would I stop trading and settle for 15%-20% in one year? My risk is limited to the cost of the options premium. Upside on an uptrend for call options unlimited in theory and limited to zero on the downside for put options.
Can you share with us where you got those statistics, from what studies/research?
Appreciate it.
I think these are the actual reasons in my opinion:
1) Because 90% come into the trading world having sipped the cool aid of fancy cars, yachts and financial freedom with completely the wrong perception of trading.
2) Because everyone, reads and studies and does what everyone else has read/studied/done and so you have an endless conveyor belt shuffling losers ad infinitum.
3) Because most people cannot curb their appetite for gambling, and very few have the discipline to trade effectively. If trading feels like an adrenaline rush roller coaster then most likely you're not trading correctly.
4) Because most people don't have the observational mindset to notice patterns or spot highly probabilistic setups.
5) Because most people don't have the patience to tweak/improve incessantly day/night/day
6) Because most people don't have the malleability to adjust their strategy based on different market conditions, volatility etc & get frustrated when they haven't discovered their one-size fits all strategy
7) Because most people don't have the right amount of capital or time
1) Because 90% come into the trading world having sipped the cool aid of fancy cars, yachts and financial freedom with completely the wrong perception of trading.
2) Because everyone, reads and studies and does what everyone else has read/studied/done and so you have an endless conveyor belt shuffling losers ad infinitum.
3) Because most people cannot curb their appetite for gambling, and very few have the discipline to trade effectively. If trading feels like an adrenaline rush roller coaster then most likely you're not trading correctly.
4) Because most people don't have the observational mindset to notice patterns or spot highly probabilistic setups.
5) Because most people don't have the patience to tweak/improve incessantly day/night/day
6) Because most people don't have the malleability to adjust their strategy based on different market conditions, volatility etc & get frustrated when they haven't discovered their one-size fits all strategy
7) Because most people don't have the right amount of capital or time
Most people who get into the stockmarket be it investors or traders are fed the you are going to be a millionaire mantra by seminar and book authors. Don't you find it strange nobody practically, tells them that you can lose part or all of your monies? That is where they have it upside down. Emphasize the risks and then, ask them. Do you really want to try this?
To be successful you should NEVER do what "most people" do. The list above shows what the problem is with "most people".
If you do what most people do, you get what most people get.
And most people lose.. Trading looks simple, making money with a few mouse clicks but actually is very difficult. It requires substantial research and you need to overcome your natural reaction and follow your strategy. If you're not willing to make that personal investment, or can't do that, don't get in.
And most people lose.. Trading looks simple, making money with a few mouse clicks but actually is very difficult. It requires substantial research and you need to overcome your natural reaction and follow your strategy. If you're not willing to make that personal investment, or can't do that, don't get in.
It is very simple why most traders fail.
Trader A have $50,000 to trade futures because they saw online Trader B making alot of money
1. Trader A search the internet learning to trade, invest $5000 lose it cause trader A have no idea what they are doing.
2. Trader A search online and forum find a service or trading Guru to follow, invest in Guru for about $10K and starting following.
3. Trader A start taking losses either from not following the Guru system or can withstand the drawdown or think they better trader then Guru
4. Trader A hears about another method to buy. Lose more money.
5. Trader A starts buying books from Amazon.
6. Trader A tries again. lose more money.
And on and on and on, till all the $50K is gone.
The problem is Trader A never traded paper money or tested either method for about +200 trades or ask the Guru for broker statements or proof of profitability.
This did not happen to me. I know several people this happen to. And that's the reason I will stay paper trading until I prove to myself I can make money my own way. After losing about $7000 in real trading money, I went to paper and figure out myself how to make money.
Trader A have $50,000 to trade futures because they saw online Trader B making alot of money
1. Trader A search the internet learning to trade, invest $5000 lose it cause trader A have no idea what they are doing.
2. Trader A search online and forum find a service or trading Guru to follow, invest in Guru for about $10K and starting following.
3. Trader A start taking losses either from not following the Guru system or can withstand the drawdown or think they better trader then Guru
4. Trader A hears about another method to buy. Lose more money.
5. Trader A starts buying books from Amazon.
6. Trader A tries again. lose more money.
And on and on and on, till all the $50K is gone.
The problem is Trader A never traded paper money or tested either method for about +200 trades or ask the Guru for broker statements or proof of profitability.
This did not happen to me. I know several people this happen to. And that's the reason I will stay paper trading until I prove to myself I can make money my own way. After losing about $7000 in real trading money, I went to paper and figure out myself how to make money.
It is the herd mentality. People feel more comfortable if their choices coincide with the majority. Like buying more shares as a stock keeps dropping in price. If it is a bargain at $50, it must be a better bargain at $30 is the logic. Problem is the stock is trending down. Correct decision is to just short the stock.
One of the biggest problems are bias. Someone sees a chart where there is a miraculous V recovery, thinking this is normal and the stock market is easy, so why not make all the easy $$$$?
The same goes for ALL chart analysis and building systems. This is hard to overcome, though automation without charts may help somewhat.
The same goes for ALL chart analysis and building systems. This is hard to overcome, though automation without charts may help somewhat.
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