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Saturday, 6 September 2014

Why do most day traders fail ?

Thought of posting some weekend thoughts. We all know that only 20% of the traders make money in the market. Some statistics show more than 90% of day traders fail. Why ?

Top reasons why traders fail

1. Trading without any scientific approach This results in repetitive losses forcing most of the day traders to quit    the floor in few days – months from start.

2. Addiction and over trading - Many times, the entire trading day is governed by emotions and several trades are made one after the other , thinking that the loss in one trade can be made up by subsequent trades. Most of the trades will be based on hopes rather than any scientific method and finally the day ends in losses. Same repeats every day. Trading less and making small money every day is the motto of this website.

3. Not mastering the trading using paper trading - Many traders, watch the market for couple of days and jump into real trades without practicing the same techniques on paper. The key is to become an experienced trader by doing paper trading, before you actually start putting your money on the table.

4. Using a mix of trading techniques - Successful trader should have a strategy and clearly defined trading system (see our day trading course for more details). Many times ,traders jump from one technique to other and result in only losing trades from the technique. Consistently using one or two systems is the key to success. This is the reason, why we recommend only very few intraday trading techniques. Readers can try and choose the one that fits their style.

5. Trading based on live hot tips - Never ever trade based on real time tips from brokers or other sources. Follow your own trading system. By the time the tips provider gives you the tip, the big move would have already happened.

6. Not doing pre-market analysis - I have written several times why pre-market analysis is important for a successful day trade. If you do not do sufficient research before the market open the next day, you will enter wrong direction trades. Do the following research before you trade.

  1. What are the National and International developments ?
  2. Any news flow expected during the market hours ? (Inflation, results etc.)
  3. Where is the stock heading based on past few sessions ? (Analyse at least past one week to one month movement)
  4. Look at the news flow on individual stocks. 
  5. Shortlist a list of stocks after your research for next day. Trade only on the shortlisted stocks and only on the pre-decided direction if your trading system supports.
Hope my readers  do not fall in any of the above pitfalls. Reading, understanding and practising proven trading systems is the ONLY way to make money in the market. 

Have a good weekend !!


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