Why Traders Lose
- Thread starter smallfil
- Start date
Bad habits definitely, affect your trading. However, the single most important thing is to have some risk management be part of your trading method. If you do not control your losses, the only thing you will need is more monies! My doctor friend, lost $1,000,000 in the stockmarket. Had she been using our risk management rules, she might have lost $100,000. That is despite, doing everything wrong! Now, once, you ignore the risk management part, you are done!
I'd argue that the most important thing is having the discipline to follow the trading plan. Granted risk management is a very important part of the plan but if you ignore that part of the plan, as the Dr. in your example did, you might as well throw the plan out the window.
For sure she ignored the trading plan and its important parts but, the risk management part is what did her in. If she kept her losses in check, she would have saved probably, $900,000 of that $1,000,000. That is like heaven and hell. Losing $100,000 is still painful but, nowhere painful as losing that $1,000,000. She took positions larger than the 2% limit we had. Sticking to that 2% limit, she would have still done relatively better even though, she made so many mistakes!
I think a lot lose because they learn from the same fake mentors. If most lose, then why not just do the opposite? Like, for example, go long into resistance, short into support, short into 50% fib pull backs, use a stop that is three times larger than target, etc...
If they do all the opposite and lose, why not just flip it?
If they do all the opposite and lose, why not just flip it?
Bulkowski did an extensive research on chart patterns and there is a failure rate. Chart patterns do not work 100%. So, if they do not work 100%, what is one to do? You will have losing trades and how you manage those trades (risk management) will determine whether you have large losses or small losses most times. You want smaller losses obviously because smaller losses are easier to overcome with larger gains. Large losses will eat up profits you already earned from the stockmarket and set you back. I would not blindly, flip positions because stocks go into trading ranges before resuming the trend. If you just flip your position, you just compounded your losses!
I'm not talking about flipping positions. I'm talking about doing the opposite of what the other 99% who all lose are doing. 99% are trading chart patterns, and using a 3 to 1 target to stop. Why not flip it. Why not trade the anti pattern, and use a 1 to 3 target to stop. I understand that the 99% will quickly tell you how this won't work, and all the gurus will quickly tell you this won't work, and they'll continue trading and losing money. The question is, would you rather make money, or lose money?
Because the trading plan isn't the problem it is probably the trader.
Traders let emotions get in the way.
I'd be willing to test this with you if you like. You post a before the fact trade with your explanation, target, and stop. I'll take the exact opposite. Let's do this for a few weeks and see who is winning, and who is losing.
Sounds like a plan. We can start a new thread. Swing trade stocks,