When it comes to trading the vast majority of people lose money, but why? What is it that causes all these people to fail?
Trading against the trend.
It's a fact that the vast majority of traders enter trades against the trend. We all hear the phrase "the trend is your friend" time and time again yet when we look at the data from some of the largest brokers in the game it's blatantly obvious that the majority of traders are trading against it. Why traders are doing this is a different story but the fact that they are doing this is a major factor in why the majority of traders fail.
Overtrading.
In life, we are taught that the more we do something the better we will get at it, and the more we put in the more we get out. This philosophy doesn't directly apply to trading. Obviously over time practicing trades and gaining experience in the craft will cause you to improve but where the problem lies for traders is on the day to day basis. You only need 1-2 trades per day max to make incredible returns, some days you don't even need to trade. What causes overtrading is either greed or revenge trading and sometimes both! A trader might have a profitable trade one day and think to themselves, one more won't hurt then guess what happens. Greed makes the trader lose the next trade causing them to lose the profit they just made. Now upset by the situation they decide to take a third trade, but because now they are upset and not thinking clearly they lose again. The process will go on and on perpetuating itself creating a losing streak.
Strategy jumping.
With the internet in full maturity these days information on how to do anything and everything is right at our fingertips, the same goes for trading. This is a great thing for some but detrimental for others. Traders are able to find endless strategy videos on how to trade. They will find one that seems promising and try it out for a short period of time then after 5-10 trades and them feeling like they could do better they go back to look for another strategy never giving the original one enough time to really get good at it. By doing this over and over the trader never develops their own version of a strategy that works for them providing them consistent profits. They will get stuck in a loop of looking for the next hot strategy, trying it, losing money, then going back to the drawing board. This can go on for weeks, months, or even years eventually wearing the trader down causing them to lose hope of being profitable.
Comments