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The Ten Reasons Why So Many Traders Lose So Much Money:

  1. One of the biggest reasons that many traders lose money is that they simply trade with no plan. Their entries, exits, and position sizes are simply random opinions so they have no edge, and their money is taken by those traders that do have an edge.
  2. A great way to lose money is to continually fight the trend in their time frame. The easiest money in the market is made trading in the right direction that the majority of cash is flowing. Buying dips in up trends, and shorting strength in down trends, is a profitable endeavor.
  3. Trading with no study of past price action, or historical perspective of chart patterns, is like trading in the dark. Back testing and chart studies shed light on what a robust trading system really looks like.
  4. Bad traders chase moves after it is already too late, while profitable traders take high probability, robust entries with great risk/reward ratios.
  5. A huge difference with profitable traders is they trade consistently small position sizes, rather than the large position sizes of unprofitable traders. Those that continually ‘bet the farm’ on enough trades eventually lose their farm, and their trading account.
  6. Egos are very expensive things in the markets. Profitable traders are able to admit they are wrong fast, and remain cautious in every trade, regardless of their confidence level. 
  7. Being emotional as a trader is very expensive. Fear makes traders get out of a trade when they should be getting in, and greed makes them buy into the end of a trend when they should have been taking profits. Much of a successful trader’s earnings come from trading off other people’s emotions.
  8. Not doing your homework before you trade is a great way to get schooled by those that have.
  9. Not understanding the real odds of out-of-the-money options is a great way to transfer wealth from option buyers to option sellers.
  10. Not understanding the risk of ruin is a great way to be ruined. Your position sizing, total market risk exposure, stop losses, and discipline will determine if you survive long enough to be profitable.