Why Traders lose money Part-I

Its a well know fact  the failure rate of traders is extremely high. 97% of Traders fails in trading. Lets look at reason in this 2 part series article why most of traders fails which we can use as an input in improving our skill set and get into top 3%.


Thinking Trading is easy

What is required to do trading, You need a account with broker and few thousand rupees and you are good to go. You can place Buy and Sell order and make millions out of it. This is what most of the new trader think when they see Options doubling tripling in matter of days.

Now think over it

If you wanted to be a Engineer and  make a 6 figure income every year, you have to pass with god number in lot of exams. Beginning with your first four years of university.

But to get admission in a good college you need to do well in 10 and 12 class and have a good academic record. During your years in the school, there are numerous tests that judge your emotional abilities, to handle the job along with your intelligence.

Once you finish your Engineering Degree , you know have to pass various interview exams of the companies you are applying and willing to join

Once you’re in, you need to work hard to be best performer to get promotion and sustain in the organization.

The end result is that after 4 years of universities and 3-5 years of hard work for company you are working , then and only then, will you consistently make a 6 figure income.

Now, let’s look at trading . What do you need to become a trader? A Broker account, laptop/mobile and Rs 10000. Yet everyone thinks they’ll be making a consistent 6 figure income in a few months or even years.

Forget the fact that the trading is full of some very, very smart people, who have spent years learning how to be a consistent trader.

Forget the fact that you’re going up against Mutal Funds. FII’s/DII’s trading desk, HFT , Algo traders that have the best technology, best traders, best analyst and system testing.

Is it any wonder so many fail?

Poor risk management

Below are few quotes of Paul Tudor Jones I read everyday before i start my trading day, It might improve your risk management also.

You can have the best trading strategy in the world, but poor risk management, you still end up  as loser.
“Every day I assume every position I have is wrong.”

“At the end of the day, the most important thing is how good are you at risk control.”

“I am always thinking about losing money as opposed to making money. Don’t focus on making money; focus on protecting what you have.”

“If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in. There is nothing better than a fresh start.”

paul tudor jones play great defense

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