Why Do 99% Of Traders Lose Money
Most of my friends who introduced me to trading only mentioned the good side about trading, others even went to the extend of mentioning becoming a millionaire over night. This was the best deal in town for me , I quickly invested all I had into trading and a few hours later I had blown the whole account , reality kicked in , the markets are brutal. I had to dig dipper and I found out that the, reasons below lead to 99% of traders losing money.
Undefined poor risk management
The greater percentage among traders does not apply risk management at all and do not understanding the risk associated with forex trading. A trader can make good daily profits and lose it all, to the extend of losing your initial capital. This is mainly because most traders have good entry strategies but poor trade management and risk management.
Most traders waste time blaming the markets, broker, account size for their loses instead of moving forward and focus on how they can cut their loses and let their profits run. Accepting risk is not just putting a stop loss, one has to accept the emotional risk, loss of money, being wrong. This will help a trader to trade without fear, take responsibility of all results and stay focused.
Greediness due to the get rich quick mentality force trading to go beyond their limits and as a result instead of becoming rich quick they lose it all quickly. The Holy grail in trading does not come due to jumping in and out of trades all day long whereas a disciplined consistent approach with a compounding growth will eventually lead to success. Trading is not gambling patience and consistency are of paramount importance. Unrealistic expectation will lead to utter doom.
Not managing trades
Most traders have good trading strategies which show them when to enter the market however they don’t have a trade management plan to use after entering the trade when hard part start as the position starts moving against their predictions, or the market evolves and devalues the set up before moving away inline with the forecast.
Not having a trading strategy
A clearly defined effective, well back-tested trading strategy is a must have preliminary requirement for traders before deposing trading a live account. A trading strategy with clearly defined procedures to follow at each trading stage from analysis to journaling. Also putting risk and money management into consideration. Any variables outside the trading strategy must not be incorporated when making a trade decision which enables the trader to review after some trades the performance of the strategy.
This forces traders to risk more than 2% of their account and have extraordinary targets such as 500% growth in one trade. Moat traders do not have the patience and discipline to grow a small account slowly. As a result they either gamble to grow the account fast or blow it all. Trading small account is just but a setup for a big disaster, it will only end in tears.
Unclear trading decisions
Consistence as a trader comes from having a solidly defined trading strategy that does not incorporate random variables or mental stop loses which are not predefined. When you enter a trade you are no longer in control you TP and stop loss takeover and other predefined trade management parameters. Incorporating robust ideas which are not part of the strategy leads to indecisiveness which leads to emotional stress as the abandoned decision leads into profits. Other shift from one strategy to the other without giving the strategy they are using a good sample size to see if the strategy really works. Thus it is always important to measure your trade performance.
Lack of Research
Most traders are busy on social media looking for signals from the self pronounced successful traders targeting people,’s money by selling a wrong image of trading, big houses, expensive cars which might be true but its a journey its not an overnight thing. Where a signal provider just say but that asset and you are a millionaire. Traders must do their own research on what really works and how to apply it. If they are to receive trading signals they must receive them from a signal provider with the same thinking process as their after doing research. I advice trading to read 30 books on trading psychology.