7 Biggest Reasons Why Most Traders Fail, and How You Can Avoid Them
Failure is a part of the learning process, as most people say. However, some would argue that when trading, failure should not be an option – which is an opinion that many people hold.
At the same time, the rate of failure of pretty much all traders is quite high, meaning that most of them lose money on their first trade/investment. While we do agree with our first statement regarding failure, we also think that one should learn more about trading before diving into their first trade.
Last but not least, if you view more info about brokers, you realize that, given the variety of options, the chances that you fail your first trade due to lack of knowledge are high. As such, here are seven reasons why you fail and how to avoid falling into their trap!
Trading is Easy
Obviously, the first and most common reason is traders thinking that what they’re about to do is going to be easy! Most people that decide to pick up trading consider it as an easy and fast way to get rich. This is the wrong approach.
Before they know it, they lose half of their paycheck or manage to get it stuck in a trade that will only become profitable in a couple of months – or even years.
Once they experience a couple of fails, traders realize that analysis and research are more than just important. However, upon facing the plethora of indicators, algorithms, markets, and strategies, they freeze. Upon freezing, most of them either quit trading or quit analysis, engaging in bad trades again. Analysis and research is imperative!
Chasing Their Own Tail
If they manage to overcome analysis and research, traders will soon realize that they also need to follow trading strategies. Beginners will most likely continuously chase the most profitable strategies out there and change the ones they use on a regular basis.
However, according to professionals, it’s much better to use a strategy of your own that you can adapt to any market changes.
Risk management is another big problem for beginners. Why? Because they simply don’t care about how much they invest. If they come across a trade that they think might be extremely profitable, they go as far as investing their entire capital in it.
You have to invest wisely. Upon testing your strategy, determine its win percentage and invest accordingly – usually no more than 10% of your capital at once.
At the same time, some traders do not have exit strategies. If they notice that they lose a trade, they start stressing out and, ultimately, let their asset crash to the ground.
Instead, they should be able to notice when they lose a trade and develop a proper exit strategy that will minimize losses.
No Strategy, No Plan
Obviously, most traders don’t have a strategy, or even a plan. One can’t expect to enter trading just to become filthy rich. One must have goals and aspirations. Of course, trading can be just as good as a daily job, but the money traders win must be used in some way.
When it comes to trading, money is best used in reinvestments and risk management!
They Act Based on Rumors
If you have traded crypto at least once, you already know that most crypto traders act mainly based on rumors. While this is helpful, since rumors move the market, a proper strategy can’t be developed on such research, if we can even call it thar.
A proper trading strategy and analysis should be based on about 20% rumor, while the rest is pure market analysis and trend forecast.
The Bottom Line
As you can see, most traders fail because they take too many aspects of trading for granted. They believe it’s either too easy or that it’s easy to master – trading is neither.
Trading requires you to constantly be gaining experience while actively trading – especially if you want to make a proper job out of it!