The Real Reason Traders Fail

maxinger · Aug 1, 2024

maxinger said:
Because they listen to this song :

And they persist to do the impossible
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And they refuse to give up.
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It doesn't mean if you try and try damn hard, you will succeed decades later.
Sorry to say but at some point, you have to give up.
Then go try other businesses/careers/jobs.

The real reason why traders fail is because they are trying to do the impossible.
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Some traders might attend courses conducted by motivational speakers.

Motivational speakers don't tell you when to surrender/give up.

They don't tell you some tasks have very low / zero success rate
eg
spin the earth in the clockwise direction - success rate 0
be an F1 driver - success rate 0.00000001%
be a successful trader - success rate <5%
be a Walmart worker - success rate ~20%

Overnight · Aug 1, 2024

Jdesey said:
Why is it that 90% or more of traders fail? I mean have we really asked this question. It is a baffling statistic.

I just finished Tom Hougaard's excellent book “best loser wins” and he talks extensively about this. He was able to get data on 25,000 traders, conducting over 1 million trades. He has said in his book and many other books I’ve read, that good trading goes against our human nature. Much of the mistakes that we make as traders can be traced back to our caveman days. It is hardwired in our DNA to avoid pain, to run away when we are in stressful situations, to avoid being harmed. So much of what we have to do demand that we go opposite of our 200,000 year old brain. So, we can really blame our ancestors, or our brain wiring if you will.

This is also help me to understand how I can know the right thing to do but don’t do it in my trading. I have come to handle that 100 times better than in the past but it’s definitely still a challenge. Why? Because I still have a 200,000-year-old brain. It is not easy to do the thing which feels uncomfortable, feels not right.

Like for example I can be profitable on a trade I can even be up 40 or 50% and don’t hit the exit button. Or be negative 30% and not exit, and see it go to -80% or -100%. That is my hardwiring kicking in, Greed and Fear. To exit means I may miss out of more profit. To take loss is to feel pain and admit I was wrong. Both go against my hard wiring and do not feel right to do.

So the real question is how do we overcome our hardwiring? Unfortunately it takes a lot of time and experience. Unfortunately it takes a whole lot of pain along the way. It sucks to go through hard times but I think that’s part of what has made me finally somewhat successful as a trader. And now we can use the computer to do that un-human activity for us. I set limit orders (bracket orders) to get me out and do the thing that is hard to do.

Anyway I would love to hear your thoughts on this? If you are baffled by your struggles as a trader, give yourself a break. You are human and that seems to be the issue.
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Instead of reading books about it, why don't you trade real money and find out for yourself?

oshjdf · Aug 1, 2024

A trader can only be considered a failure if he/she has edge (a trading system with positive expectancy) but no discipline (risk management and psychology (realistic expectation, consistent execution, etc)).

Most who have failed has no edge to begin with. If we look at microscopic view of every trading system that got no edge, there is possible improvement/fix to each part of the system that can increase the expectancy of the system (although still cannot achieve +ve expectancy after all possible improvements/fixes). This requires journaling/documentation in order to troubleshoot. Be careful of overfitting though.

rb7 · Aug 1, 2024

tony.m said:
99.99999% of drivers fail to make it as a Formula 1 driver.
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In order to fail trying something, you need to try first. I don't think many people tried to be a Formula 1 driver...

rb7 · Aug 1, 2024

There are many reasons why traders failed.
Just look at this forum and you'll find many.

newwurldmn · Aug 1, 2024

rb7 said:
There are many reasons why traders failed.
Just look at this forum and you'll find many.
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What are you talking about?

this forum is full of guys pulling 400k/year off 30k day trading accounts.

MarkBrown · Aug 1, 2024

emotions and lack of experience go hand in hand and are irrefutably the reason traders fail.

Scataphagos · Aug 1, 2024

Jdesey said:
Anyway I would love to hear your thoughts on this? If you are baffled by your struggles as a trader, give yourself a break. You are human and that seems to be the issue.
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Traders fail because..
1. They are not ready to cope with the markets... intellectually*, nor emotionally
2. They lack diligence/discipline

*Not saying players are stupid... but rather they "don't know enough" before they put their money at risk

taowave · Aug 1, 2024

A good place to start is "Prospect Theory"..
Basically it states that investors hate losses 2x as much as they love gains..
In a nutshell,we are built to turn down higher expected returns...

shine · Aug 1, 2024

The main reason for failures in trading, in my opinion, is the desire to get rich quickly, with minimal financial and mental investment. Such gambling addicts want to quickly hit the jackpot, but constantly lose like casino players and lose everything.