Why Traders Fail to Make Money in Stocks

Nobody wants to be a loser at anything, especially when it comes to money. Statistics show that 90% of stock market traders fail to earn money. It states that 80% lose money, 10% break even, and 10% make consistent profits over time.

These statistics aren’t based on location, age, gender, or intellect. Everyone aspires to be in the top 10% percent of traders who consistently make money when trading the stock market, yet few are prepared to put in the necessary effort and time.

Do what most traders don’t do to be successful in the stock market. After all, you can’t know what you don’t know. So how does an inexperienced person figure out what they should be doing from the thicket of available information?

In this post, we’ll examine why most stock market traders fail to earn money regularly, as well as what you can do to stay away from the 90 per cent. I’ll also go through what the 10% of traders who succeed do.

Three basic rules to successfully trade the stock market

To become a successful trader, all you need to do is follow the formula:

Knowledge + Experience + Effort = Success

The most successful full-time traders I’ve ever met didn’t attribute their success to chance. All of them followed these essential procedures:

Step 1: They practiced and acquired the know-how, the knowledge in other words. 

Step 2: They amassed experience.

Step 3: These two phases are meaningless unless the trader is prepared to work hard to meet their trading objectives. They need to put in the effort. 

Another thing to consider is that becoming knowledgeable in the stock market takes two to five years. There is no replacement for hard effort, and there are no shortcuts to attaining excellence and competence as a trader.

I’ve discovered that many newcomers to the market tend to make things more complicated than they need to be. First, professionals in the financial services sector appear complex, mysterious, and highly educated. They tend to intimidate the newbies. Second, marketing businesses that claim to have all the answers to earning big bucks are actually just looking to sell you an overpriced guide. 

Many traders will fail in their trading efforts because they fail to develop a profitable strategy, and even if they do, they don’t stick to their strategy over time. Consistency is one of the key elements of a successful trader – consistently trading with proper risk management, and consistently trading the same entry and exit signals that they set themselves. Candlestick trading signals  are among the best signals to use when setting such a strategy, as they can be consistently recognized and acted upon.

A lack of understanding how to trade the stock market

The single most common reason why most traders fail to make money in the stock market is a lack of knowledge. We may also include low education here since many people are attempting to educate themselves. Yet, they seek information in all the wrong places, which results in them receiving a substandard education. Learning how to invest in the stock market surely takes time and it’s also important to seek help from experts in the industry.

A successful trader understands the importance of establishing a lucrative trading strategy, how to evaluate a stock to understand why they’re buying and selling, and how they’ll manage the position. More significantly, they follow strict money management principles such as stop-loss and position sizing to minimize their investment risk while also increasing returns.

The psychology aspects that influence your trading

Understanding your psychology is the most difficult part of trading. Psychology takes second place if lack of knowledge is the primary cause of trader failure.

A trader’s attitude and psychology greatly influence how they trade and how they perceive the stock market. Fear and greed are two of the most common emotions among traders and investors, and without the correct training, these feelings may be amplified, resulting in costly mistakes.

People frequently tell me they have little money but desire to trade highly leveraged markets. 

This is the problem: you’re more emotionally invested in it if you don’t have a lot of money. The concern of losing activates strongly when the trade goes badly wrong, which leads to poor judgments and losses. Take a look at Saxo markets for some more info.

Fear is the most dangerous opponent of those who wishes to exchange because it is a far more powerful emotion than greed, and it comes from a lack of knowledge and confidence.