Why do 95 % of traders lose ?

Discussion in 'Psychology' started by oilfxpro, Feb 18, 2012.

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  1. The trading business is learnt through experience and knowledge.
    Most writers of books write books because they can not make money from trading ,if these writers/mentors/signal sellers/gurus could make money from trading they would be doing it and not selling books,courses ,signals,services and software.They can not pass on their experience to new traders in the form of courses or books, experience is the key.Many of the books are like buying a dictionary ,not many of them teach successful profitable trading.They don't prepare traders for trend failures and dealing with uncertainty.

    most traders start inexperienced and clueless and everything they have been sold by snake oil salesman unveils itself .All those pricks advising traders about putting two pip stops against one minute trends , are ensuring the 95 % number sticks.

    The natural stress responses of humans is to protect their property , including their account from losses.The fight or flight stress responses interfere with perfect execution of trades , leaving traders with poorly executed trades/systems etc.Many responses are harmful to profitable trading i.e cutting profits in fear, scrubbing and closing profitable trades due to doubts and uncertainty and , over trading ,overexposure due to greed.There are hundreds of other personal traits which interfere with trading.

    To make money from trading ,one has to run their profits when the market is giving them , and to cut losses .Trading can be quite profitable , as per example two weeks of trading.Out of 34 trades ,two or three trades made the most of the profits , but for almost 12 days the trader was making no money.This makes it mentally difficult to trade , because it doesn't fit in with the human psyche.
    Our psyche requires pleasure and reward , and trading does not offer it consistently.

    In plain language, this means that we have to get a certain amount of pleasure and stimulation or rewards from our daily activities and what we put into our bodies. If we don't, then we create a pleasure deficit or what is known as "reward deficiency," and are subject to depression, anxiety and poor performance. Each day we have to stimulate our reward pathways adequately if we are to function well emotionally, mentally and physically.

    Look at this system performance , 112 pips profit over two weeks made from this system and examine the reward frequency.Many traders would have missed the two or three profitable trades , due to depressed trading mood, uncertainty and anxiety.These traders would end up unprofitable in the 95% club of losers, guess they were in loo when the set up came up.

    80 % of trading is mastering the psyche.
  2. epetrov


    Then why traders avoid speaking about their trading?
    Do they hide anything??
  3. because you don't know who you are talking about when you talk about 95% of traders. You just assume they have at least as much common sense as you. It took me a while to realize that 95% of traders inherited money or are laid off, and saw an ad stating that they could make money trading, and that's how they started out. And that is how they will end up.

    So when you talk about traders, you are really only talking about the 5% who actually engage in it minus the gullible idiots who tried it. And then I would guess, the true number is more like 50%.
  4. Eight


    Linda Raschke points out how people are so devastated by losses that they quit trading for the day right when they should stay in the game... I'm sure that realizing it's a game that involves some losses and figuring out your win percent and w/l ratio is a step in the direction towards being able to stay in the game and be profitable.

    There are 16 Myers' Briggs personality types, if just one of those was suited to trading, the odds of being a winner would be approx 6%.. but the personality types are not represented evenly, some occur only 1-2%.. I'm thinking that possibly only one or two personality types are at all capable of winning and many of the personality types aren't remotely interested at all... so we have a selection process going on that limits the players and handicaps chances of success... Add to that just how difficult it is to find a winning strategy for one's self or to navigate the world of gurus and I'm surprised that there are ANY winning traders at all... on top of that sometimes traders are huge successes until the market changes and they can't adapt..

    The difficulties are enormous in intraday trading. The pace is crazy early on and many don't trade until an opening range has been established and many more don't trade until the first half hour ["Kiddie Hour"] has passed, then things slow down about the time that the Europeans stop trading the US markets.. and sometimes there is news pre-market and most of the days' range has been established pre-market.. adapting to all those time periods and variations of pace is in itself a major hurdle. More information is expressed by the market as the day progresses but learning what to do with all the information is another large hurdle...

    I'm surprised that anybody can do it..
  5. It is to do with pleasure and enjoyment.Our psyche requires us to have pleasure , reward , and enjoyment , talking about losses is not enjoyable ...it is actually painful memories, rewarding (others think of you as an idiot) and it is not pleasing.

    The guys shout about their winning days , but their losers are long term investments in wall street twolet paper , losers are investments. .
  6. Chartsky


    From my experience, there are some vendors/gurus that can actually trade . . . but not many. Linda Raschke was mentioned in a prior post. She sells stuff but can also trade. So I wouldn't agree with the blanket statement that people who sell courses, books, signals, etc. do it because they can't trade.

    But I do agree that the personality-type of a successful trader is rare.

    I don't know that it's a personality-type so much as personality traits: above-average patience, extreme self-discipline and self-confidence. If someone has those qualities they have a good chance to succeed as a trader.

    I see more success from those who have competed in sports at the high-school level or above, whatever their current profession. But much less success from the more elite, learned professions (doctors, lawyers, CEOs, etc.). These people who are used to always "being right" get taken to the cleaners by markets that don't care what they think. LOL!
  7. #1 Undercapitalized, which means excessive margin use.
    #2 Trying to daytrade a single corporate ticker, instead of sticking to SPY
    #3 Impatience.
    #4 lack of planning
    #5 lack of risk management.

    Pretty simple.
  8. ssrrkk


    If it's simple, why do 95% lose? Apparently it wasn't simple for 95% of people. By the way where does this 95% statistic come from?
  9. why is it 95% of the people who buy bowflex don't actually ever get in shape?
  10. 95% small traders lose, they just lose.
    #10     Feb 18, 2012
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