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HomePROFITABLE TRADINGWhy Most Traders Lose Money

Why Most Traders Lose Money

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Most traders DO lose money. Social media makes it look easier than it is because so many people are posting their winning trades. Availability bias is believing information you see most. Seeing it most doesn’t make it true. Losers just tend to be less public about it.

When I traded at a day trading firm for 7 years, with training, only 4% who applied made money. 

Why is that? Here are the real reasons traders lose.

Trading is a Hierarchy of Skill

At any given second, there’s only so much liquidity. You need to be faster than others to get in and out. You need better strategies than others. The people who are good, eat, the people who aren’t get eaten. Like a sport, to make a living, you need to be better than most others.

A trader making $1000 per day is taking that off others. Others lost or missed out on that $1000.

Almost nowhere else in the world do you get to play with pros as soon as you start playing. It takes time and skill improvement to be a pro. You get there by getting beaten by pros for a while.

Time, Research, Practice

Getting better than others to make $$ requires putting in more “intentioned” work than others. 

  • Most quiet too soon. It takes at least 1yr to trade decently, usually longer.
  • Losing traders trade random things. Successful traders practice trading 1 or 2 very specific strategies/setups/patterns. You don’t need to know everything; you just need to know a couple patterns that work and then you trade them repeatedly. Practice that.
  • Putting in time is different than practice. Work on specific strategies and then work on fixing mistakes 1 at a time. Doing trading-related “stuff” isn’t practice. 

Trading-Related Failures

Traders fail because they’re undercapitalized, take on too much risk per trade, can’t take a loss when it’s time, don’t have a strategy, don’t follow the strategy, over or under bet (position size), trade when they aren’t supposed to, don’t trade when they are supposed to, follow “tips”, focus on results instead of process…to name a few.

Psychological Reasons Traders Fail

Psychology affects everything we do as traders. If we’re over-eager, over-confident, anxious, angry, or get stuck thinking about our past trades, that’ll affect what we see and how we trade. Trading isn’t just practicing strategies; it’s a journey of self-exploration. Looking at how our thinking is affecting our trading. Most people never do that. Unless the psychology part is improved, all the strategies and trading books in the world won’t do any good.

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