My Top 6 Reasons Why Most People Fail At Trading

[dynamicsoul 10]

Many traders fail for many different reasons. I am sure if you have been active in the markets for any decent period of time you will have experienced the numerous obstacles that the markets can throw in front of you. Sometimes the thing holding you back from being successful is one the most basic principles. A high percentage of traders are not able to overcome them, and often have not even considered them. Below you will find my list of the most encountered obstacles which stop a willing trader from making a profit.

 

Find Your Edge

 

So you have a trading system but do you know what makes it profitable? Have you any idea of its strike rate and can you trust it? A question many traders cannot answer. A simple system that gives you 51 winners versus 49 losers from every hundred will make you money if you know how to manage it correctly, but there is an element of trust needed. Before you trade your system you need to properly analyse it to find out how often it wins and how often it loses. How big are the wins compared to the losses? How big is the drawdown? After answering these questions you will gain an element of trust in your system and be able to ride out the lean times to harness the gains from the bigger picture.

 

Stick To A Plan

 

If you are in a hurry to get somewhere you wouldn’t take the long route would you? Would you drive 1000 kilometers without consulting a map? I would think not. Much is the same with trading. Your system (or edge) is your plan and when travelling to your destination you must stick to the highway. Never stray from the plan and ignore any signs that tempt you to try a different route.

 

Don’t Spend What You Can’t Afford

 

Often a big mistake a losing trader will make is to trade too heavy in one single position. To lose a large percentage of a trading account on one trade is suicide and in doing so you are giving yourself a mountain to climb whilst clawing yourself back to breakeven. Not even mentioning the psychological damage it will do. Trade small in comparison to your trading account, the market will always be there tomorrow and trades will come each and every day.

 

Focus On Points Not Profit

 

We are all in this for one reason and that’s to make money, but money is also the root of all evil. By focusing your mind on percentages of your trading account, counting the points won (not dollars) and risk reward ratios eventually the money will stack up on its own. Thinking “I lost 20 points on that trade” rather than “I lost $200 on that trade” will also help you to stay out of the markets emotional games.

 

Learn From Mistakes

 

They say the clever people in this world are the ones who can instantly learn from their mistakes. This is also true when trading. If you repeat the same mistakes over and over its possible you may not have the correct frame of mind needed to become successful in this game. Learn and never look back. If you stray from your plan and lose try to understand the mistake and reinforce to yourself that it will never happen again.

 

Less Is More

 

How much time can you commit to this? This is a question that should be answered well before you select a system. Trade when you feel happy, trade when the markets open, take your money and leave. Often no position is the best position. Overtrading is one of the biggest downfalls of any new trader and will most likely lead to your account (and mind) burning out. Takes some trades and go do something else to stay fresh.

 

Live Your Life

 

Last but not least never forget what you are doing this for. You are doing this to give yourself a better life and more money. Enjoy it, take some time to live your life and don’t get caught up in the trap of being addicted to the markets.

 

Written by Pete Southern, editor at stockpricetoday.com

[steve46 12]

One of the reasons so many new traders fail is that they see so many wannabe vendors spouting useless crap....when you are done with the marketing intro, I look forward to reading something useful......something we haven't heard before....

 

Thanks.

[SpideySense 10]

It's possible that like most vendors Pete will never get beyond giving away trite truisms that others give away for free too.

 

More bait for the sucker newbie?

 

If it smells like xxxx and it looks like xxxx, then you'd have to be stupid to taste it.

[dynamicsoul 10]

Charming!.. Welcome to the forum Pete..

 

It's a first article.. what do you want me to talk about next?

 

Gann, EW, Delta and tons of other stuff I've studied and binned over the years because of information overload..

 

I'll write something on how I trade, no indicators, only price action..

See if that suits you better...

 

Laterz. Pete.

[steve46 12]

Actually we don't need you to be charming, but perhaps we could get you to say a word or two about where you come from and what your background is.....What did you do before this....? What do you plan to do here? Do you vend a product or service or both....? Honesty works just fine here however what we see recently are folks who show up and offer to provide something and what they end up doing is trolling for email addresses..Ironically the "first post" often takes a form very similar to yours........its a tough act to follow....Welcome to the forum.

[MadMarketScientist 11]

I'll write something on how I trade, no indicators, only price action..

 

Welcome to the forum ... looking forward to seeing your contributions.

 

thx

MMS

[dynamicsoul 10]

Thanks

 

Maybe I shouldn't have got a vendor account?

 

I don't actually sell anything.. I write news for the website in the article footer link which provides free real time stock prices and charts etc.. Not selling anything, just posting up some stuff to help raise some awareness of the site I help out.. which in turn only provides a free service..

 

Am on vacation at moment, but will write some other more "useful" stuff when I get back..

 

Pete

[TheRumpledOne 14]

Why You Fail At Trading?

 

Because just like the movie GROUNDHOG DAY, you are doomed to keep repeating your errors until you finally figure it out.

 

But that's just the first part. After you stop losing, you have to learn how to win.

[TheRumpledOne 14]

One of the reasons so many new traders fail is that they see so many wannabe vendors spouting useless crap....when you are done with the marketing intro, I look forward to reading something useful......something we haven't heard before....

 

Thanks.

 

Wow! Give the person a chance before you attack them. Who moved your cheese?

[TheRumpledOne 14]

It's possible that like most vendors Pete will never get beyond giving away trite truisms that others give away for free too.

 

More bait for the sucker newbie?

 

If it smells like xxxx and it looks like xxxx, then you'd have to be stupid to taste it.

 

We are adults and adults are old enough to make their own decisions. It TL a place where LIBERAL DEMOCRATS gather? Geez... enough of the NANNY STATE MENTALITY.

[steve46 12]

Actually princess, you and your "never lose again" type comments represent the same stupid misleading crap that causes people problems when they try to learn this challenging business...so I don't have a lot of patience with you either.....

 

and just to be fair, on the off chance that I am completely wrong...if ANY of you have read this gentleman's comment and from that point on have NEVER been on the losing side of a trade please take the time to say so here on this thread....surely there must be at least one of you....

 

Looking forward to hearing all about that

 

Lovely talking to you...

[llonigro 10]

[...

 

and just to be fair, on the off chance that I am completely wrong...if ANY of you have read this gentleman's comment and from that point on have NEVER been on the losing side of a trade please take the time to say so here on this thread....surely there must be at least one of you....

 

Looking forward to hearing all about that

 

Lovely talking to you...

Yes Steve, people who live in glass houses shouldn't throw stones. I enjoyed that contribution because no matter how much you think you know about trading there is always something else you don't know. Don't knock this guy, he makes a lot of sense even though we have heard it all before our minds always need reinforcement of the basic ideas.

[steve46 12]

[...

 

and just to be fair, on the off chance that I am completely wrong...if ANY of you have read this gentleman's comment and from that point on have NEVER been on the losing side of a trade please take the time to say so here on this thread....surely there must be at least one of you....

 

Looking forward to hearing all about that

 

Lovely talking to you...

Yes Steve, people who live in glass houses shouldn't throw stones. I enjoyed that contribution because no matter how much you think you know about trading there is always something else you don't know. Don't knock this guy, he makes a lot of sense even though we have heard it all before our minds always need reinforcement of the basic ideas.

 

by all means gentlemen carry on.....I am still waiting for any person who trades using the Rumpled One's guidance and has never lost.........to say so.....

[TheDude 10]

Steve -

 

Given the levels of anxiety you seem to suffer when people question your own 'advise' that everyone has seen and read before (i.e. yet another TA based approach), I'm surprised you are giving this chap such a hard time my old cheese.

 

May I respectfully suggest that before trying to intimidate others, you too try and produce something that some of us havent heard or seen before?

 

Try-

 

Something other than TA (TA is all the same old bollox really)

Something other than a proprietary 'secret' like your HFT indicator or Urma Burma's 'magic' indicator

Something other than '10 parables of success' and similar bed time reading.

 

You see, the thing is my old cheese, it's not the method, but the skill in which it is applied that makes the difference.

 

Trading is no different to any other game like golf or football. The rules are the same for everyone. There are countless books on how to improve ones game. There is no 'secret' to how to play golf, football, or the markets. Yet not everyone is a golf, football or trading 'pro', despite all one needs to know being out in the open.

 

The difference between success and failure is inside the individual. Its determination and application. Nothing more.You cant teach that in a gazzillion of your 'Im a guru' threads.

 

Try and be a little more mature please. Theres a good cheese.

[llonigro 10]

The difference between success and failure is inside the individual. Its determination and application. Nothing more.You cant teach that in a gazzillion of your 'Im a guru' threads.

 

 

Love that analogy of success. How does one get that ? Through hours and hours of endless night's practice or blowing up just a few more than necessary accounts ?

or do you become so driven that failure is not an option ?

I tend to agree with you on this one.

[goodoboy 10]

One of the reasons so many new traders fail is that they see so many wannabe vendors spouting useless crap....when you are done with the marketing intro, I look forward to reading something useful......something we haven't heard before....

 

Thanks.

 

Steve, you right on that part. Gotta friend of mine considering paying 350 a month for an indicator.

[Jack Francisco 10]

the main reasons- they are not well learned or they are suffering psychological problems.

 

Learn forex first before opening a real account. There is no alternative way to get success without practicing. Work hard, keep patience, you can win.I think that in all business peoples lose money some time and some time they get profit, profit and loss is the part of any business, so do not be take tension, if you will trade with good strategy then never you will get loss.

[TheDude 10]

Heres a few ideas....

 

not in any order....

 

1. trading the wrong products that are too volatile (fx, crude, etc)

2. paying too much commission

3. greed (see 1)

4. ignoring professional strategies as they are seen as being out of reach or difficult

5. trading like a punter in a casino (ie intraday momentum strategy on an outright), then talking about 'edge' and 'risk management' lol.

6. general ignorance of self and self delusion

 

can I have a 7th?

 

7. joining the herd rather than thinking for yourself (ie trading fx, risking 2%, signals based solely from a chart etc etc - just like the books and gurus tell you).

 

I'm still surprised when folk question why 80-90% lose, when they are all doing slightly different variations of the same thing! 6 months or a few years later - if they are still around, they are still doing the same thing and losing, but they think they have changed what they are doing, yet they havent - they've just changed timeframes, or using a different chart setting, product, etc. lemmings!!!

[SunTrader 10]

My list has only one entry:

 

1. Waste time making lists.

 

There I go doing it myself. Darn.

[Larry1234 10]

For me, I would rather say,

 

I never want to put stop loss order, because of this, my losses are huge where as earnings are less.

[TRADEZILLA 10]

the main reasons- they are not well learned or they are suffering psychological problems.

 

I think this says it all..

 

Inexperience looses at the beginning, but psychological issues prevent progress..

 

I have seen this over and over again amongst lots and lots of traders.. Many traders gained a lot of knowledge over the years but can't put it together to make it profitable.. Often its clear they have lots of blind spots that comes from psychological issues..

[1a2b3cppp 10]

Find Your Edge

 

This is the top problem.

 

Most people do not have a winning system.

 

I've never had a problem sticking to a plan but I've had a very rough time coming up with a profitable system.

 

Following the rules of a losing system won't get you anywhere.

 

Breaking the rules of a losing system won't get you anywhere.

 

The majority of systems you see online are either too vague to have specific rules (which gives the "guru" an out if you ever dare to question his instruction), or have concrete rules but don't backtest or forward test profitably.

 

While we're on the subject, beware of any "guru" who says there's no point in backtesting. That basically means "I don't want you backtesting my system and finding that it isn't profitable because then you'll stop paying me for seminars books and lessons."

 

Stick To A Plan

 

Yeah, definitely, assuming you have a profitable system.

 

If you have a profitable system you are 99% of the way there.

 

Don’t Spend What You Can’t Afford

 

For sure.

 

Focus On Points Not Profit

 

Probably more applicable when increasing contract size. If your first trade is a loser once you increase from 1 to 2 contracts, you might not want to see the dollar amount.

 

Learn From Mistakes

 

Definiately.

 

Less Is More

 

How much time can you commit to this? This is a question that should be answered well before you select a system. Trade when you feel happy, trade when the markets open, take your money and leave. Often no position is the best position. Overtrading is one of the biggest downfalls of any new trader and will most likely lead to your account (and mind) burning out. Takes some trades and go do something else to stay fresh.

 

Oh, you mean overtrading. Yeah. Well, stick to your system's signals!

 

Live Your Life

 

Last but not least never forget what you are doing this for. You are doing this to give yourself a better life and more money. Enjoy it, take some time to live your life and don’t get caught up in the trap of being addicted to the markets.

 

Agreed.

[SunTrader 10]

..

Am on vacation at moment, but will write some other more "useful" stuff when I get back..

Some long vacation.

 

I hadn't noticed it almost a year ago since OP started topic and last posted!

[harreymartin 10]

I agree with these reasons, because of them people fail in trading! I have many time spend for which is not affordable to me! and got fail so traders should follow "Don’t Spend What You Can’t Afford"

 

 

 

 

 

 

Best Regards

Harrey Martin

[dbelov275 11]

The reason why I failed in trading when I started was because My motive was initially wrong and my approach was terrible. I wanted to make so much money in a short time so desperately that I lost everything I started with. I approached Forex like a gamble and it cost me. Well, that is behind now.