Why Do More Than 90% of Traders Lose?

[emg 12]

Here is an interesting article i came across.

 

http://articles.latimes.com/2011/ap...rading-20110403

 

Think real real real hard if you want to pursue trading. Your dream of making money, your dream of getting rich quick, your dream of driving a Ferrari are all a myth. Movies u watched how traders get rich quick are all a myth.

 

The reality is, more than 90% of small traders lose!! They just lose!!!

 

I am looking for the best answers

[emg 12]

interesting quote from the article

 

"The business model for forex trading is to burn the customer and then find another one," said Larry Harris, a USC professor and the former chief economist at the Securities and Exchange Commission.

[steve46 12]

Here is an interesting article i came across.

 

http://articles.latimes.com/2011/ap...rading-20110403

 

Think real real real hard if you want to pursue trading. Your dream of making money, your dream of getting rich quick, your dream of driving a Ferrari are all a myth. Movies u watched how traders get rich quick are all a myth.

 

The reality is, more than 90% of small traders lose!! They just lose!!!

 

I am looking for the best answers

 

The answer sir or madam, is that retail (amateur) traders lack education, aptitude, skills, experience and are usually under capitalized....In addition, they are often guilty of simply visiting sites like this one, asking everyone around them how to trade and then throwing money down the drain on approaches that utilize lagging indicators. Clearly you can't learn to fly jets by watching "Top Gun" and then pretending to be Tom Cruise...and generally speaking you won't become a special forces soldier by watching Sylvester Stallone in Rambo....what is needed is education, guidance and time...otherwise the odds are in favor of failure and loss of capital...

[emg 12]

The answer sir or madam, is that retail (amateur) traders lack education, aptitude, skills, experience and are usually under capitalized....In addition, they are often guilty of simply visiting sites like this one, asking everyone around them how to trade and then throwing money down the drain on approaches that utilize lagging indicators. Clearly you can't learn to fly jets by watching "Top Gun" and then pretending to be Tom Cruise...and generally speaking you won't become a special forces soldier by watching Sylvester Stallone in Rambo....what is needed is education, guidance and time...otherwise the odds are in favor of failure and loss of capital...

 

that is the best answer so far!

[MightyMouse 12]

interesting quote from the article

 

"The business model for forex trading is to burn the customer and then find another one," said Larry Harris, a USC professor and the former chief economist at the Securities and Exchange Commission.

 

 

Emg,

 

Could you please post the whole link? the one you posted does not open properly.

 

MM

[daVinciLite 10]

Here is an interesting article i came across.

 

http://articles.latimes.com/2011/ap...rading-20110403

 

Think real real real hard if you want to pursue trading. Your dream of making money, your dream of getting rich quick, your dream of driving a Ferrari are all a myth. Movies u watched how traders get rich quick are all a myth.

 

The reality is, more than 90% of small traders lose!! They just lose!!!

 

I am looking for the best answers

 

Well, if you are one of the 10% of small traders that makes money, you'll be rolling in it. Don't you think? Ninety percent of the money goes to ten percent of the participants. Sounds fair to me. I'd have to find something else to do if it was otherwise.

 

dVL

[SIUYA 11]

its a numbers game and like many rewarding experiences there is a pointy end at the top of the pyramid.

(I would like to know how much money the top 1% make)

[jaysmith124 10]

http://www.latimes.com/business/la-fi-amateur-currency-trading-20110403,0,588787.story

 

something best left to professionals, according to personal finance experts.

 

I find the word "Professionals" a misnomer. Professionals have have lost a lot of money belonging to others who trusted them.

Edited April 9, 2011 by jaysmith124

[Tradewinds 12]

Thanks for that article. If the topic is discussed for long enough and deep enough, then it will come to the issue of, "Should the government regulate and attempt to control risky behavior?"

[Mantiso 10]

Statistics are as good as jokes! ... The most secure transportation in winter in Sweden is Motorcycle & most secure sport in south East Asia in Summer snowboarding! (so far the statistics)

.... But you are right, most of traders are losing money ... But why? For me is The Answer easy, it is not really harder to make money as a trader then other professions, but the most people think, to make money as a trader is as easy as walking around ...

Everyone learn a profession and has to make an education and has to be always updated in the profession.

The reality is, There is no easy way to make Money, maybe less than 10% could understand it and are also ready to work hard also as trader for the money....

[estate1997 10]

its a numbers game and like many rewarding experiences there is a pointy end at the top of the pyramid.

(I would like to know how much money the top 1% make)

They take 40% of all the money.

[jaaks 11]

Traders lose primarily because the primitive part of the brain is wired to avoid loss and the primitive brain makes all the decisions. Once we incur a loss trading, we try to recoup the loss. This usually means riding the loss down to greater losses until the pain gets too great. Then we bail at a huge loss, with a lot of emotional pain. This loss is burned in our memory and subconsciously we we start trying to get the money we lost back. Let's be clear. This is occurring subconsciously. You are not aware it is happening. That is why you repeat the same behaviors, and lose over and over again even thought your higher brain know it is wrong. By the way, the higher brain will think of sort of excuses to justify the primitive brains actions. None of which are true.

 

How do you counter this strong, unconscious force? First you need a plan. The first part of the the plan is cash management. You need goals based on the type of trading you are doing. You need strict loss stops above all, how much money you are willing to lose for the type of trading your are doing and if you hit it, you are DONE! The same go for profits. Once you reach you profit goal, never, never lose it. You can keep riding the the profit train in the market let's you but if it reverses and returns to your min profit level, you are OUT! Once you have experience in the market, you can alter the latter part by taking partial profits and increasing your position size for really obscene profits but never, never violate your daily loss rule. Never. Keep a log and study it. You will find the best ratio of win to lost based on your trading style.

 

Why is the stop amount so important other than the obvious? Because starting out, you are likely going have more losing trades than winners. But you can still make money: Say you set a stop at $100 and it cost $2.00per buy and sell and the slippage is $.01/share and you profit goal is 4 times your loss amt. This means you could lose 3 times for every win. A 75% loss rate in trades. After 3 losses, you will have lost $312 + the slippage. That amount is based on the number of shares. Let's say it is 300 shares. so the slippage is $3. So your total loss is $315. The next trade in profitable, so you gain $396. You have profit of $81. If you do this every day, your profit is $405/wk. Couldn't live on this amount in America, but by increasing the amount, you can get to the point you could. But the best way is getting a win / loss ratio greater than one. Then you really make money. The only way to do this is accumulating trading time. If you could get to 3 wins for every loss, then your gain per day is 873 or $4365/wk. You could live on that! Note: this would be a very good winning ratio and depends on the stocks you trade and the type of trader you are.

 

The fist part of your plan is cash management. The next is a plan of when to buy, when to sell, when to take profit, when to increase your position size. Is there one better than another? Yes, depending on the type of trader you are and the market. Also different plans are needed in different market phases. But every plan fails if you don't relentlessly stick to it. Never vary, never vary, never vary. You can alter your plan when you are not trading, but while you are trading, sick to it. Is there a fool proof trading method? No. If there was, that method would soon get all the profit in the market and everyone would use it, resulting in it's failure as the rules would now have changed. Anyway, if you had a system, would you let anyone know about it? Not likely! At best, you could come up with something that work for the market conditions at that moment but would fail when the conditions change. "The market is always the same, the market is aways changing." There are plenty of adaptive black box systems that supposedly are using fuzzy logic and neural programming. From what I know, their ratio is 35% winners, 65% losers. And they make money hand over fist because they have strict rules and they never vary from them.

[peterjerome 10]

Re: Why Do More Than 90% of Traders Lose? interesting thread.

 

so...if 90% are losing, 10% must be winning?

seems reasonable some of those 90 percenters are on this board sharing their secrets.

are there any ten-percenters here too?

if only there was a way to tell the difference.

 

perhaps we generate the results we think we deserve.

 

peter

[Tradewinds 12]

are there any ten-percenters here too?

if only there was a way to tell the difference.

 

peter

 

Even though I will take good information from anywhere and anyone, I do put some value in what people are telling me by the way they behave. And I tend to think that the real truth is a mix of what different people are telling me. It's natural for people to go to extremes in their beliefs, seeking non-existent, absolute certainty to make them feel secure.

 

When I listen to a politician, I like what they are saying, and it seems good. Then I listen to another candidate, and I like what they are saying, and it seems good. Then I listen to yet another candidate, and a lot of what they are saying seems good. But then I realize that they are opposing candidates with polarized view points. But they only communicate the positive and constructive side to their plan. So it all sounds good, because you never hear about the downside.

 

If someone becomes evasive in telling me what the "cons" might be, then I get very suspicious. I try to get a sense of whether someone is sincere, confident and secure in what they are communicating. Many people want to be lied to. This is typical in business management. If you tell management the truth, they won't like you, so many people fall into a trap of needing to tell management what they want to hear so you don't get a bad performance review.

 

Trading is as much about how a person deals with the bad news and the difficulty as how good their strategy is.

[SIUYA 11]

They take 40% of all the money.

 

only 40% ??

another "statistic" to throw around.

 

when it comes to who to listen to, and who says what......

listen to a lot and make your own mind up based on what works for you. If you cant do that then trading is not likely to be the hooby/pastime/profession for you.

You would be better off being a broker....they figure heavily in who makes the money.

[ra189663 10]

Most people lose money for a combination or reasons, primarily lack of knowledge and lack of discipline. Lack of knowledge: not having a trading program; having one and not knowing what type of market it works best in; not knowing what the loss rate is with the program; not having an alternative program when the market changes; the list goes one and on.

 

Discipline: not sticking with the program; not knwoing how to control losses; not controlling losses if one knows how; greed; fear.

 

Thinking that the process of making money in the market is fairly easy to master (underestimating the whole process and the variables that go into it); lack of preparation (which gets back to lack of knowledge).

 

Lizard brain thinking that there really is a holy grail out there.

[Stock Trader One 10]

One of the reasons that 90% of traders lose, especially with forex, is due to not trading/concentrating on 1 or 2 assets, such as the EUR/USD at 1 time, rather than 5 or more.

 

This approach would at least maximize your attention span on the top assets, increasing your chances of earning profit.

[PiptopiaX 10]

Why Do More Than 90% of Traders Lose?

 

Simple answer: They don't.

The "Traders" referred to were never Traders to begin with.

 

The question posed by the Article, and found on countless "Trading Forums" should be:

 

Why do 90% of PEOPLE who attempt Trading lose?. If 90% of people who attempted to perform surgery, without benefit of a Medical Education failed, would it be correct to say "90% of Surgeons fail"?

[bobcollett 10]

Re: Why Do More Than 90% of Traders Lose? interesting thread.

 

so...if 90% are losing, 10% must be winning?

seems reasonable some of those 90 percenters are on this board sharing their secrets.

are there any ten-percenters here too?

if only there was a way to tell the difference.

 

perhaps we generate the results we think we deserve.

 

peter

 

WISE words Peter

bobc

[emg 12]

Emg,

 

Could you please post the whole link? the one you posted does not open properly.

 

MM

 

Foreign currency trading is an easy way to lose money - Los Angeles Times

 

 

the link

[MightyMouse 12]

Foreign currency trading is an easy way to lose money - Los Angeles Times

 

 

the link

 

Thank you for reposting.

[noego 10]

Simple answers. Not everyone is cut out for it but everyone who trades think they are. Not everyone is willing to put the time in to learn and watch in a LIVE market (they spend their time back testing and looking at charts from right to left instead of from left to right). Not everyone is willing to admit that it is their lack of discipline to wait for proper setups that causes their huge draw downs. The 10% who make it have paid the price in time (10,000 hours or more) and money....They have EARNED it.

[peterjerome 10]

...The 10% who make it have paid the price in time (10,000 hours or more) and money....They have EARNED it.

 

noego, you make sense to me. sounds like you walk the walk!

one thing i would add is "They'" have lost a bundle...more than once.

 

how about an informal poll of all those who make their living trading?

all forms, day, swing, position, investors, speculators, market makers, gamblers. hedge managers...

anybody out there?

[Mysticforex 13]

noego, you make sense to me. sounds like you walk the walk!

one thing i would add is "They'" have lost a bundle...more than once.

 

how about an informal poll of all those who make their living trading?

all forms, day, swing, position, investors, speculators, market makers, gamblers. hedge managers...

anybody out there?

 

 

Your wish is my command.

[Loustar1 10]

Hello and thanks for starting this topic.

 

Why do more than 90% of traders lose?

 

First and foremost they lose because they don't know how to trade.

 

They don't know how to trade because they never took the time to truly learn what trading really is and how it works.

 

The never took the time to truly learn how to trade because by the time they found their way to trading, they were in a hurry to make money and would believe all of the hype that led them there.

 

They believed all of the hype because they are usually dissatisfied with their current financial situation and are looking for a quick fix for it.

 

They look for a quick fix because all of their "hard work" has never led them to their monetary dreams and they have lost all faith in hard work and it's benefits.

 

Not wanting to work hard in order to have their financial dreams leaves them in a mindset that makes them easy prey for the hucksters that promise riches beyond their wildest dreams with a few clicks of the mouse.

 

They are now willing to risk much of their hard earned money in the trading world with virtually no formal or structured education/mentoring and promptly begin losing money and self confidence at a rate faster than anything they have ever tried before, and they soon become part of the woeful 90% we've all heard about.

 

The truth of the matter is that the exact thing that's needed to succeed in the trading game is the very thing most are running from -- >> hard work.

 

Most that come to trading bring with them a mindset that hard work hasn't worked for them in the past and they look at trading as the "easy" - "work smarter instead of working harder" solution.

 

After all, how hard can it be to click a mouse a few times?

 

I challenge you to find ANYONE that is successful in ANY profession to tell you that hard work wasn't a key (if not THE key) to their success.

 

The "hard work" in this business doesn't come from watching charts or compiling a bunch of indicators into a system. It comes from doing the tough mental work - understanding who you are as a person - how you handle risk - how you deal with the unknown outcome of a trade - how much discipline can you bring to bear in your trading.

 

Success comes from learning how to trade with an open mind, accepting the fact that you are not as smart as you think you are and then deciding to "work" as "hard" as necessary to become as smart as you need to be to succeed as a trader.

 

Success in trading (or any field for that matter) is an INSIDE JOB. It all starts in your brain and how you use it.

 

It's not about intellengence or how many degrees you have hanging above your desk.

 

There are many great traders that are consistantly profitable that have come from modest backgrounds and some with no prior trading experience.

 

It's about combining the will to succeed with hard work.

 

This combination disiplines has rarely failed anyone who has used them to their full extent. No one selling you a $5,000 course or a $97 ebook will tell you this up front.

 

This is why the sellers of the courses ( I'm not saying that they're all bad) focus on the raw emotion of wanting to get rich in their salespitches instead of telling you that you need to prepare to work at this for at least three years before you can grow into the mindset that will allow you to become a successfully consistant trader.

 

If you were told the truth upfront, they would probably lose a sale.

 

I will have more to say about this in my next post (have to get on with my other life) and will also touch on what you can do to get yourself on the right track. (I have nothing to sell, don't worry).

 

I find this next question something that you should spend some time with. It's a sort of "thinking out of the box" kind of question.

 

We all can agree for now that 90% of all traders fail. Yes?

 

My question is this -- >> What EXACTLY are the 10% that win consistantly doing? -- And why aren't we talking about that?

 

Be Well

 

Loustar1