The vast majority of people who try it are losers to begin because they are just looking for easy money and not willing to work for it. If you were to consider only people who were willing to approach it like a job and willing to put in the time to succeed the success rate would be much higher.
I think most of the new traders will not even get this far. I knew a few guys who thought that trading was some sort of video game, or darts throwing activity. To me the #1 reason that most people fail at trading is that they are not in a financial position to trade. They trade with scared money, they MUST make a profit so they can pay their expenses before they can learn what's going on in the markets. And it takes time to cut through all the hype and BS. So many people bitch about the SEC $25k PDT rule, I'm one of them, but realistically, how can you make a living in stocks with less than that, even if trying to scalp? I read somewhere that "one has to earn his right to trade". I think it's so true. The reason #2 IMHO is the lack of knowledge/experience of how to use leverage/size properly. The fact that a broker offers $300/contract minimum (if you are trading futures), or 4x margin for stocks, doesnt mean that you have to use it all. One false move and it's a wipeout time. I've been there. One has to know what size to use in what market conditions. The same goes for a type of trade. Is it a quick countertrade bounce, trend following, countertrend accumulation? Are your pockets deep enough to survive that size you are trading in? There are quite a few other less important errors that can be corrected in time... but one has to have the time to learn the markets, and the bills have to be paid. People just jump in too quick trying to make millions in a week, imo. J
Very constructive post here. Bottom line, Trading is easy to learn, but difficult to master. Influences on Trading Plans are both environmental and biological. Like Joab said, the learning is endless.
you ask why? this is why i think they fail http://www.elitetrader.com/vb/showthread.php?s=&threadid=130351 making 100% return in one day in a $100,000 account is very tempting. rather than making 100% over a years work.
I'm not so sure about that. With a regular job, you have some predefined rules that you have to follow in order to succeed and perhaps move up. There is usually a general guideline for success and it isn't very difficult. With trading, there is far too much guess work involved. Especially in the beginning.
To the OP, I'm not sure how you get the 98. Any way, we all agree that the real number is something around that number. Let assume 98% is a mass that was responsible for driving a move. The below is reasons, that I think, responsible for failure. Unable to understand own psychology and mass psychology, and therefore unable to extract himself from the mass. Lack of flexibility, meaning that have a strong sense of right and wrong, and therefore use reasons for arguing. Seeking, digging to justify or disqualify a move. The reality is that a move is a move; no need to justify. The point is how can one identify the pivotal point of the mass, meaning that how to spot when the mass become TOO fearful or TOO greedy. Listen to the crowd heart, but act the opposite.
as a matter of fact it is. people lose becuase they treat trading as a get rich quick no brain job. in reality, a successful consistent winning trader needs hard work, independent thinking, strong steel mind, skillful money managament, entreprenear spririt, decision making ability under murky conditions, just as any profession. experience and expertise. some trading skills can be learned from the books, but most part must be learned from the real market: like handling loss....
The same as any new business. Number 1 reason therefore would be poorly capitalised. 2nd would be a less than robust business plan.