The common held belief in the trading world is that 90% of traders are not profitable long term. This was based off some old studies of brokerage accounts. I read the original source article long ago in a trading book that referenced it. Other more recent studies seem to have found that the failure rate could be as high as 95%. What causes the majority of profits to go to such a tiny minority of winners? I asked this question in my facebook trading group and received these answers:
- Lack of homework on what works.
- Inability to manage stress.
- Allowing big losses in your trading account,
- Quitting when they learn trading isn’t easy money.
- Inability to trade volatile markets.
- Inability to emotionally manage equity curves.
- Trading without a positive expectancy model.
- Never committing to one trading strategy.
- Changing trading systems.
- Trading based on opinions.
- Not managing position sizing.
- Not managing the risk of ruin.
- Searching for a Holy Grail instead of a winning system.
- Over thinking their trades.
- Reactive trading decisions based on internalizing emotions.
- Trying to pick tops and bottoms and miss the trends.
- Trading with leverage without understanding the risks.
- Trading on margin without understanding it.
- Over trading.
- Trading with an account too small.
- Trading without a plan.
- Trading without stop losses.
- Not understanding what it takes mentally to be a trader.
- Setting stops too tight.
- Setting stops in obvious places.
- Having only small winners.
- Buying what looks cheap.
- Selling short what looks expensive.
- A lack of discipline.
- Taking tips.
