Why 95 Percent of Traders Lose Money?

TRADING the stock market inherently involves some level of risks.

MOST TRADERS fail — about 95 percent in the first year, not based on geographical region, age, gender, or intelligence; but due to an unrealistic expectation about trading the stock market.

To be successful in trading, you must do what the majority of traders don’t do. This may seem like a simplistic view.  Yet the majority of people who are attracted to take higher risks, believe that they are adequately equipped to trade after reading a few books or attending a weekend course.

Everyone aspires to be the top 10 percent who consistently make money when trading the stock market, but few are willing to put in the time and effort to do so. 

Trading the stock market is a business and the only way you can become a consistent and profitable trader is to treat it like a profession. 

Basically, to become a successful trader, you need to follow this simple equation: Knowledge + Experience + Effort = Success.

And here are three reasons why most traders fail:

1.  The Lack of Knowledge

We are told that knowledge is everything, but in the context of trading, it is the application of the correct knowledge that is everything.

The market is littered with wanna-be traders, some of who are profitable due to sheer luck rather than good knowledge. Inexperienced traders tend to analyze the market too much, and are overwhelmed by a load of information.

Other traders seek out instant gratification by plunging head-first into the stock market using complex strategies in hope of profiting from their efforts, but sadly, many lose their hard-earned savings on unrealistic expectations.

We can put the blame on poor education in this arena because while many seek to educate themselves, they look at all the wrong places and end up getting a poor education.

2.   The Lack of a Trading Plan

The obvious reason why many traders lose money is due to the lack of a proper trading plan. 

Some people refer to themselves as traders just because they buy and sell shares. 

But when questioned about how they analyze stocks, they simply have no idea and claim that they only read newspaper reports and websites, and occasionally look at online charts with their broker.

Their answers reveal they have little, or a rough idea about how to assess a stock or interpret a chart.

To be an educated trader, you need to combine high-level knowledge with experience; otherwise, your probability of success over the long term is very low.

Let’s get real. Would you go to a doctor who has only watched some videos or attended a weekend workshop?

On the other hand, an educated trader in one understands the importance of developing a profitable trading plan, how to analyze a stock, why they are buying and selling;

And how to manage their trades with good money management skills, like putting a stop-loss and their position sizing to ensure they minimize their investment risk to maximize profits.

Once you have acquired this knowledge, you will begin to develop the experience. But failing to give this matter its due respect is why most traders fail to make money in the stock market.

3. Last but not least, it is about your Trading Psychology.

No matter why you trade, learning to trade is the easy part; the hard part is understanding your psychology.

If lack of knowledge is the main reason most traders fail, then psychology comes in a close second.

A trader’s attitude, or psychology, determines not only how they approach their trading, it also determines how they will approach the stock market.

The emotions of fear and greed often drive traders and investors alike, but without the correct education, these emotions are often amplified, which leads to costly mistakes.

Fear is the biggest enemy of those wanting to trade because it is a much stronger emotion than greed.  Usually, the fear kicks in once a trade is placed — which explains the greed or the desire for quick and easy returns. The lack of knowledge and confidence in one’s trading plan results in the inability to execute the plan successfully.

Those with little money to invest should also avoid trading highly leveraged markets, as most people who do – are generally driven by greed.  People who desire quick returns, should not be trading this market, as they rarely, if ever, think about what they can lose.

And here is the challenge, if you do not have much money, you tend to be more emotionally attached to it and therefore cannot afford to lose it. Therefore, if the trade goes the wrong way even slightly, the fear of losing kicks in, which often results in poor decisions and losses.

COSTLY MISTAKES

There are many more reasons why people lose money in trading through costly mistakes.  

For example, some newbies tend to compound their mistakes by exiting profitable trades too early, for fear of losing their profit. 

This leads to an even bigger sin of over-trading, as some individuals chase the market in an attempt to regain lost capital or profit. 

Other common mistakes include watching their trades daily or even intra-day, or, worse, making their decisions based on short-term market volatility.

Ultimately, the market doesn’t care how much you think you know, or that you only have a few thousand dollars. It does what it does irrespective of whether or not you make money when trading the stock market.

Nevertheless, nobody is to be blamed. After all, you don’t know what you don’t know, right?

HERE’S THE DEAL

In reality, there is no substitute for hard work and shortcuts to become a competent trader. 

Self-education is good, but it requires commitment and hard work to implement good money management rules to minimize risk and maximize profits.

Having said all that, now is the time to stop procrastinating and wasting time on unimportant matters.

So how does one begin to learn how to trade the stock market confidently and profitably? If you want to learn how to earn passive income and achieve your financial freedom goals, the answer is here.

The good news is, you don’t have to be a genius or a rocket scientist to achieve consistent, profitable returns when trading the stock market.

You can start growing your wealth by following a proven and easy trading formula on “How to 10x Your Profits in the Options Market Right Now by following 3 Simple but Extremely Potent Strategy.

Click on the link to find out more: 

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Why 95 Percent of Traders Lose Money?

by gerald time to read: 4 min
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