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Day trading is a risky business where you tie your emotions into your trade. Most traders fail for the following reason in order:
Let’s dive in!
It is a known fact that the number 1 reasons why most traders fail hard is they allow their emotions get to the best of them.
No matter how great your risk management strategy is or your trading plan, your emotions will not dictate all of that.
There are 4 main emotions you need to be aware of during a trade:
These 4 emotions may lead you to overtrade, risk too much on a trade, avoid your trading plan or gamble your money away.
It’s important to be aware of these emotions, and learn how to manage them correctly so you don’t end up like most failing traders.
In the career of day trading, survival is the name of the game. To survive you need a sound risk management strategy.
Traders who do not follow a risk management strategy are like to fail, and blow up their trading accounts in a single day.
Think of risk management like a healthy relationship. In a healthy relationship you want to be:
Without any of these pillars, you’re in a toxic relationship. The same applies to your trading account.
Set rules for your account such as:
A third reason why most traders fail is because they do not follow a trading plan to the tee. Traders who don’t have a trading plan is like a hiker who goes hiking without map.
You’re lost, and you’re making impulsive decisions.
To avoid this common trading failing mistake you need to have a plan that tells you when to enter a trade, when to exit, and when to cut it as a loss.
Revenge trading is a very common reason why most traders fail in the stock market. A lot of traders cannot stand the fact that they were wrong, or maybe they lost too much money in a single trade, and now they want to get into a trade to get it back.
However, from personal experience, this actually leads to your emotions taking over, and leading you to a bigger loss or potentially wiping out your entire trading account.
It’s best to avoid revenge trading. The best way to avoid it is to set a daily stop loss on your trading account.
Exit your trading account, and go enjoy your day with another hobby.
A lot of traders treat trading like it’s a casino. They look for quick and big profits. They do not care about the risks that is involved with the trade.
Most traders make a lot of money with this mentality, but end up losing even more, because this is a recipe for disaster.
Trading is one of the greatest tools for wealth building, and to treat as casino, is only doing a disservice for yourself.
The last reason why most traders fail is because of not have a good understanding of how to trade.
Some traders just don’t know fundamentals such as:
Trading is a ever changing, and it requires the trader to adapt. This may be extremely difficult as a beginner because you already have so much on your plate already.
Trading is a risky business as mentioned above. Even the most experience traders experience losses.
But what makes them different from the 99% of traders out there is the following:
The more you can execute like a robot, the closer you’ll reach to being the 1% of succeeding traders.