Why Do Traders Lose Money Part -I?

As per data analysis, trading with  no strategy or trading edge has a 50% chance of success  over a long series of trades. Markets at all time highs its time to ask yourself did you make money in this move, If yes you are the few disciplined one who have made money if you have lost than its time to introspect and learn from your mistakes and prepare yourself as a stronger trader.

The main reason most traders lose money is because the majority of people have little self-control and cannot resist the temptation to over-trade and over-leverage when there is no one to be accountable to.

Another main reason most traders lose money is because they try to buck the trend for some reason, even though they KNOW they have a statistically higher chance of winning by sticking with the trend until it is clearly finished.

Lets discuss the above points in more details in the first series on this article

• Not accepting responsibility for losses and mistakes

As human beings we all have a tendency to pass the blame and find fault elsewhere. However, when you are trading badly, it is your fault and no one else’s. If you find you are losing money in the markets it is not your broker’s fault, nor is it the result of a bad quote, a bad tip, or a hardware failure. There is no mysterious “They” out to get you or steal your money from you. Everything that happens to you in the market, good or bad, is ultimately your fault; blaming anyone else or thing is not going to help you become a successful trader.

Accepting responsibility for your losses and trading mistakes is paramount to turning your trading around. If you use a “tip” or a piece of advice from a broker or from someone else, and you lose money as a result, it’s your fault for listening to them; at least the second time around. The first step in any self-help group like Alcoholics Anonymous is admitting you are the problem and that you have a problem. If you continually blame other people or things for your trading losses, you will never improve your trading because you won’t feel any need to correct your weaknesses if you don’t believe you have any. So, a big reason many traders fail to make money is because they won’t admit they are to blame for their losses. If you want to improve your trading you need to take full responsibility and go into  traders’ rehab.

• Over-trading and not trading higher time frames

One thing that definitely prevents most traders from making money in the market is over-trading. Traders who just jump in and out of the market on emotion and greed, will not only suffer many more losing trades, but they will also rack up a lot more fees via spreads and (or) commissions over the course of a year than traders who stick to the higher time frames and understand the value of self discipline and having patience. Trading lower time frames causes many traders to over-trade because they end up thinking they see many more trading signals worth trading, when in reality there is just a lot more “junk” signals and “noise” on lower time frames.

So, if you are currently losing money on a consistent basis and you are trading lower time frames, you will definitely benefit by switching to higher time frame  trading.

Will continue discussion on this in next article

2 thoughts on “Why Do Traders Lose Money Part -I?”

  1. @Raghunand…….. If a pattern is formed in lower time frame 5 min for eg say an Inverted H & S the target is very small and all patterns have a failure rate, If an inverted H & S is formed in a higher time frame say a daily time frame chart and it breaks the neckline then it has a higher target and is much more reliable as it has formed over a larger time frame withstanding a mich larger test of time. Even this higher time frame has a failure rate same as the lower time frame but your success rate of wins and the returns on wins will be higher. As for Gann it is reliable only in a long term perspective on a larger time frame and higher resolution than for intraday. Market price action is the result of the COMPOSITE TRADER which is the majority pulling it down or pushing it up and that decides consolidation, bearish or bullish trend as a consequence and is very dynamic fluid and always follows path of least resistance. Getting trapped in the opposite direction is a result of not following trend and the noise is very high in the lower time frame as you try to analyse the entire crowd of trader action as against larger packets. An example would be trying to count the number of sugar grains in 1 Kg packet than to say 100 packets make 100 Kgs

  2. Nice article sir, but what is lower time frame and higher time frame? I am a day trader and trade based on Gann values you provide. It lasts from just 10 minutes to 1 or 2 hours.

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