90% of the population are idiots. The smart guys go into white collar jobs. So you get 95% of the idiots comming into trading. I'm not too smart, but I'm smarter than most of the idiots, so hence I make a few hundred % a year off them. I'm sure that there are actual people who are intelligent, and they're making a few thousand %, and likely off my trades.
It's hard for me to tell the difference between category 3 and 4 in that poll - trading emotionally, driven by fear and greed IS undisciplined trading - and I would say the same is almost true the other way around.
Why do most businesses fail?? Why do most athletes not make it to the pros?? Why are there only a small percentage of billionaires?? Why do so many wanna-be actors/actresses fail?? Thats just the way the cookie crumbles...... In other words; you can have all of the above working in your favor and still fail..............you will not succeed without them in your favor, IMO, but you can still fail........
Because most traders are greedy and scared. You can't worry about losses. You have to be willing to cut them. You don't have to win on every trade, just more than you lose on. Most traders let a little loss turn into a huge loss because they're scared and greedy (AKA: stupid).
A trader that loses money is out of business. Until you are consistently profitable you are just enjoying a hobby. A well known CEO I worked with on a large project a few years ago told me " The most important part of your business plan is the description of how you get paid. " You can apply this to a trading business: you'd better know how your trading model/style etc is going to generate profits. You'd better have a plan and understand each trades profit potential and risk before you enter a position. Not understanding the rationale for putting on a position - and when to get out - is the reason most folks dont make it to the professional trader ranks and go out of business.
This seems to be the most common stumbling block. Since so few people discuss their plans, much less explain them, I assume that their plans are not adequately fleshed out and tested since, if they were, the overtrading and discipline issues and money management questions would not arise (emotional issues are largely irrelevant if one has mastered discipline). Unless one has a plan that is consistently profitable and can be trusted, all the discipline and money management and so on in the world aren't going to improve the bottom line much, if at all. A reliable and profitable plan, regardless of how peculiar it may sound to somebody else, comes first. --Db
All the items listed in the poll contribute, but after working with a great number of traders, I can see that it almost always comes down to lack of discipline. If I could vote for one of the above for everytime I've lost money or I've seen another trader lose money, the lack of discipline bar would be off the chart. It so outweighs all the others. For the most part, the traders that lose money do so because they simply don't do what they said they were going to do. They have the basic concept, they have some strategies, they know what they are supposed to do, but they don't do it. Some lack of displine activities: - Adding to a losing position when it's not called for - Not cutting their losses when they said they would - Not exiting a trade when they said they would upon entry - Trading larger size than they said they would - Changing their strategy in mid-trade I could go on and on, but if traders would simply do the following, they would save themselves a LOT of $$$: - Know why they are getting in a trade and when they should get out. - Upon entering a trade, follow through and do what they said they would do at the time they entered the trade. - Enter a trade when they see the conditions they were looking for have been met. No matter what maxims you throw out, no matter what great strategies or tactics someone has, they are all for naught if the trader doesn't disipline themselves and apply them when they should.
Aside from lack of discipline, experienced traders lose money because of decimalization and high volatility. No matter how good your entry point and stop losses, a whipsawing stock and market will make even the most disciplined traders lose money.
yes you really can't leave out market conditions. If the market conditions change suddenly then you can lose money even if you are disciplined. But, the truly disciplined will never get wiped out and therefore they will live long enough to adapt.