Simple thought experiment. If for one year we only allowed the 5% "proven" winners to have access to the markets, what do you think would happen? That they would battle each other to a draw? Nope. 95% of them would lose. "Mastering the psyche" has nothing to do with it. 95% (or whatever the actual number is) lose because markets are built to ensure they do, regardless of how "good" the participants are.
There is no methodology or system which will consistently make money , most systems and methods are designed on past data , future data may be different as market conditions may change. Much higher uncertainty and increased volatility will lead to failures of the 5%. Changes in pattern behaviour influenced by extreme volatility and uncertainty will erode statistical edges , and leave traders too uncertain to trade.They will fail with their human psyche.
If trading was so easy . brokers would invest a few million and hire people to trade for them.They don't cause it ain't easy and 95 % lose when betting/gambling on junk science.
Most traders lose because thats the nature of trading and markets , a particuler trader may win or lose because of his actions, but traders plural and in general mostly lose because of the nature of markets.
How does your body react to fear of losing or losses on your account?You run like a zebra from putting on trades and your mind and body is not behaving in the same way when having a losing sequence.Most of you will avoid taking trades after a losing streak , you will miss the two or three profitable trades you should have put on. Why Zebras Don't Get Ulcers http://www.youtube.com/watch?v=5ePYet3Fbts In trading ,the 5 % want to eat your account and blow your account.They are stressing you out ,they want to eat you and this happens every time you trade. The Neurobiology of Fear http://serendip.brynmawr.edu/bb/neuro/neuro00/web2/Edmundson.html
The real reason that most traders lose is that they have a false idea of the nature of markets. They take trading advice from brokers and Wall Street, but that advice serves the interests of brokers and Wall Street, not the independent trader's interests. Many people think that the traders at Goldman are smarter and better. They may be smarter, but they obviously are not, in general, very good. If they were, they wouldn't have to rely on you and I to bale out AIG so that Goldman could be made whole. If they were, they wouldn't have to trade against their own clients. If they were, they wouldn't have to manipulate the market using their in-house analysts. (And I could go on with the many unsavory aspects of Wall Street IB's, but you get the idea.) You broker advises you to use stops to control risk, then either holds your stop orders on their servers where they can either send them to the exchange later or internalize the order. They know where each client has their stop. They know approximately how much buying or selling will be required to reach them, and if they internalize them, these stop orders become easy pickings during low volume periods. It is more or less as difficult as taking candy from a baby. Your broker also advises you to day trade; slowly grinding your account away while generating huge profits in commissions for your broker at your expense. Your broker gets some economic data releases before you do, sometimes well before. If your brokerage firm is large, it will spend millions promoting trading and "investing". Constantly fishing for new clients to replace those who have gotten discouraged at their prospects for easy riches. They will specialize in educating the new trader, but the education furnished will be in the brokers interests, not the clients. If you want to make money trading in the U.S. markets you must start by understanding the nature of U.S. markets, and then rely on your own technical analysis and never use stops that are easily hit. You must not be under capitalized, and you must learn how to defend a position as well as how to minimize losses and when to take them. And above all, you must learn to be very patient in choosing entries and exits. There are many different styles and ways of trading that can make money, but they all require that the trader have a correct understanding of the nature of the market they are trading.
The real reason that most traders lose is their psyche.The natural stress responses play havoc with game plan of the trader.A trader normally places bets on price , when market shows a direction ,trader places a bet on direction.As soon as trader enters a trade ,the market becomes choppy and stops out trader with a loss.In this situation the trader , moves stops or adds to a losing position , and losses increase. If market behaves like this image , trader will lose a load of money http://www.elitetrader.com/vb/showthread.php?threadid=241929 Trading Psychology Explained http://www.youtube.com/watch?v=CB0vjTWsrac Most of you who have traded for real will know , why traders lose out in choppy markets. Losing also has to do with understanding the markets they trade , and it's behaviour , but when it behaves unpredictably and becomes choppy , the mindset of the trader will come in to increase or reduce losses. How To Trade Choppy Markets after the event. http://www.youtube.com/watch?v=ZtfmKfphOB4
Something I have been wondering about for some time.. Can every, or most astute successful traders make lemonade from lemons? Given 5 random time entries per day for the intraday trader, can most good traders be profitable at the end of 5 random entries? You can pick long or short, but I pick the time of entry, and there will be 5 entries and exits by end of the day. You can double up or double down, whatever, but you must place a long or short upon command, and be flat at end of day with a profit. No matter how small, the object is to not lose money. Is this possible for very good traders?