Why Day trading is Tough and only 2-3% are successful

[amandeep86]

Hi Friends

Had a discussion with ST da regarding success of day traders,less than 3% of total trading population are consistent day traders.

This thread is dedicated to identify the challenges and problems faced in day trading with respect to trading Method ,Psychological Problems and many other dilemma's that lead to such a low success rate.

Idea is to compile the day to day trading challenges and problems in trading that lead to failures of day traders so that they can be learnt and improved in future.

Kindly post your daily problem that leads to failure in trading.....The problems will then be discussed and solved with senior traders

Thanks

 

[manishchan]

Hi Friends

Had a discussion with ST da regarding success of day traders,less than 3% of total trading population are consistent day traders.

This thread is dedicated to identify the challenges and problems faced in day trading with respect to trading Method ,Psychological Problems and many other dilemma's that lead to such a low success rate.

Idea is to compile the day to day trading challenges and problems in trading that lead to failures of day traders so that they can be learnt and improved in future.

Kindly post your daily problem that leads to failure in trading.....The problems will then be discussed and solved with senior traders

Thanks

Amandeep, nice thread. Don't want to be spoilsport but I thought of sharing a few threads from the past on the similar topics which you might want to go through.

http://www.traderji.com/words-wisdom/26757-what-were-worst-trading-mistakes-we-commited-list.html

http://www.traderji.com/trading-psychology/21855-tell-how-u-lost-ur-money.html

http://www.traderji.com/risk-money-management/19791-trading-mistakes.html

From my experience, the entire list of failures can be categorized into just 2 parts :

1. Technical - Failure in trading is always caused by things that can be easily fixed. Such as... taking too much risk, trading on cap that we can't afford to lose, over trading, not following/having trading plan.

2. Psychological - Cutting the winner short and letting the loser run, praying when in loss instead of getting out.. Taking trade out of impulse because you missed the last run.. not waiting for the set up to be complete and jumping into trade etc.

There are end number of problems. Diff traders having diff problems and all have fixes. The reason why only 3-5% are successful because they fail to implement those fixes and sustain them.

 

[amitrandive]

To succeed as a day trader, you must master your emotions and make clear-headed decisions. This doesn’t mean making the right choice every time; rather, it means making the best and most informed choice every time. The best decision won’t always be the right decision, but a sound decision will almost always trump an emotional decision.

Short time frames can break new traders. A heavy loss in a short period of time can be overwhelming, creating feelings of helplessness and clouding good judgement. New day traders who start with position trading based on daily charts learn to process rapid feedback and to better understand their trading results.

A day trader’s success is determined by self-mastery, a substantial commitment of time and money, and a willingness to learn from experience.

Some good reads at

http://www.traderslog.com/trading-difficult/
http://www.tradingacademy.com/lessons/article/why-is-this-so-hard/

 

[amitrandive]

Reposting one images posted in my thread.
Why do Average Day traders make losses?

 

[XRAY27]

Some hard realities in trading !!!

1. you can back test a system any number of times but when you start trading profitability will be determined by present price movement ..history may not be repeated..what looks on great on paper can lose in real market in terms of consecutive trades

2.some times pull back which you are waiting may never come !!!

3.some times markets whipsaw your position and reason which you may not understand !!!

Despite this realities we move on with better trade management..which is the ultimate factor for profitability

what makes a trader move on... (from my old post)

Don't let negative emotions encircle us

1.Trading is a stressful process,we will express many set backs,accept them and don't see the negative result of losses as a indication that you will not get success,instead react in positive way on all this negative results

2.We should turn our "FEAR OF LOSS" for learning,otherwise we will over trade to compensate the loss that we have suffered

2.Succesful traders do not blame their decisions on any one ,they accept there mistakes and learn lot from them

 

[jagankris]

Hi Friends

Had a discussion with ST da regarding success of day traders,less than 3% of total trading population are consistent day traders.

This thread is dedicated to identify the challenges and problems faced in day trading with respect to trading Method ,Psychological Problems and many other dilemma's that lead to such a low success rate.

Idea is to compile the day to day trading challenges and problems in trading that lead to failures of day traders so that they can be learnt and improved in future.

Kindly post your daily problem that leads to failure in trading.....The problems will then be discussed and solved with senior traders

Thanks

Day Traders loose bcoz
1.CAPITAL - Not having sufficient capital to trade.
This is important because of psychological confidence it gives to one in trading.
2.Time is against the day traders.
Meaning - Cut your losses short and let your profit run is the basic thumb rule of successful trading.But Day traders are forced to close their position with in the day.
3.Only 30% of time Market trends
All the systems (Mechanical,Indicator based trading systems are trend following systems).
In order to make money there has to be sufficient movement in price.But
70% of the markets remain in sideways only 30% of the time it trends.
70% of the after noon trend continues the next day morning session.
And either the next day gaps in the direction of the trend or makes swift move in the same direction and opportunity is invariably missed by day traders.
So following a trend following system whose basic principle of cut your losses short and let your profits run is violated.
4.Trading against the Trend
Day Traders take all the trades long/short ignoring the main trend and counter trend trades most likely will end up in losses.Or counter trend trade needs to be exited at the first line of support/resistance aggressively.
5.Transaction costs
Transaction costs and slippages eat profits.
6.Ignoring the price structure of higher Time Frame
Not having understanding of market structure and Higher Time Frame decision points.
7.Not waiting for low risk opportunities/SET UP.But keep chasing the price in anticipation of a great move.
8.Not understanding the importance of Trade Management and EXIT strategy.
Not moving the stops to breakeven and allowing a profit trade in to loss trade.
9.SIDEWAYS
Not knowing when the markets has moved to sideways zone / no trade zone.
10.Not having entry/exit plan for
1) high momentum V reversals
2) Price shocks - sudden wide range candle
3) Or any other special conditions.
11.Trading PLAN - Not having a detailed written Trading plan.
When it comes to trading plan keep it detailed and elaborate.Not Simple.
And update when ever new situation/market conditions/challenges encountered.
12.GREED
Over expectation in profit returns and over confidence in oneself.
And hence not exiting even market reversal signs.
13. Risk per trade rule - Just blindly following some 2% risk per trade rule or imagining the benefits of compounding with out having a system and trading plan.
Money management with out a proven system/Trading Plan/TA knowledge is a sure way for disaster.
Have sufficient capital and risk just 0.5% of capital per trade - all these are personal choices.No rigid rule depends on the psychological comfort level and financial back up of a trader.
14. Not having practice
Trading can be developed gradually over years of screen experience and before that attempting to trade all signals/opportunities is one main reason why traders fail.
15.FEAR
The reason for fear is
1.Less capital and trading believing in ones TA and trading skills bcoz of greed.And deep down one knows that trading is a probability game.
2.Over leverage.
3.Not determining the risk before entering a trade.
16.Not placing stop loss
17.Psychological difficulty in Accepting losses
In trading one cannot be always right and even series of small losses[loosing streak] are un avoidable.Learn to accept them as business costs and move on.
18.Hope - Not following the system/plan violating discipline but to hope the markets to reverse in ones direction.

To start with a proper system and waiting for low risk good trade set up opportunity and less risk per trade in the direction of main trend one is most likely to succeed in day trading.

 

[badarivt]

Many beginners have no trading plan. Even with a plan, there is no consistency in following the plan. Traders who become successful are those who one day realise that following a single plan repeatedly, say at the least over a month works. It is like learning bicycling - till now you cannot balance and suddenly one day, you discover that you can do cycling, a thrill runs through the body. However, over time one even learns balancing without holding the handle bars but the trill is gone. Cycling is just another activity. Same with trading - a professional discovers that he has to mechanically repeat his system over and over again and so starts complaining that trading is a boring activity!

People who lose should think - have i formulated a simple strategy and followed it up at the least for one month? A man starts digging a well and within no time, one after another come and advice him that the particular spot is a dry one and suggest a new site. At the end of the day, he complains to his friend that even after digging 70 feet at various places suggested by others, he failed to strike water. His friend tells him that had he dug 70 feet in a single place, even a rocky area would have yielded water. Advice is cheap, following it is the tough part

 

[TraderRavi]

Day Traders loose bcoz
1.CAPITAL - Not having sufficient capital to trade.
This is important because of psychological confidence it gives to one in trading.
2.Time is against the day traders.
Meaning - Cut your losses short and let your profit run is the basic thumb rule of successful trading.But Day traders are forced to close their position with in the day.
3.Only 30% of time Market trends
All the systems (Mechanical,Indicator based trading systems are trend following systems).
In order to make money there has to be sufficient movement in price.But
70% of the markets remain in sideways only 30% of the time it trends.
70% of the after noon trend continues the next day morning session.
And either the next day gaps in the direction of the trend or makes swift move in the same direction and opportunity is invariably missed by day traders.
So following a trend following system whose basic principle of cut your losses short and let your profits run is violated.
4.Trading against the Trend
Day Traders take all the trades long/short ignoring the main trend and counter trend trades most likely will end up in losses.Or counter trend trade needs to be exited at the first line of support/resistance aggressively.
5.Transaction costs
Transaction costs and slippages eat profits.
6.Ignoring the price structure of higher Time Frame
Not having understanding of market structure and Higher Time Frame decision points.
7.Not waiting for low risk opportunities/SET UP.But keep chasing the price in anticipation of a great move.
8.Not understanding the importance of Trade Management and EXIT strategy.
Not moving the stops to breakeven and allowing a profit trade in to loss trade.
9.SIDEWAYS
Not knowing when the markets has moved to sideways zone / no trade zone.
10.Not having entry/exit plan for
1) high momentum V reversals
2) Price shocks - sudden wide range candle
3) Or any other special conditions.
11.Trading PLAN - Not having a detailed written Trading plan.
When it comes to trading plan keep it detailed and elaborate.Not Simple.
And update when ever new situation/market conditions/challenges encountered.
12.GREED
Over expectation in profit returns and over confidence in oneself.
And hence not exiting even market reversal signs.
13. Risk per trade rule - Just blindly following some 2% risk per trade rule or imagining the benefits of compounding with out having a system and trading plan.
Money management with out a proven system/Trading Plan/TA knowledge is a sure way for disaster.
Have sufficient capital and risk just 0.5% of capital per trade - all these are personal choices.No rigid rule depends on the psychological comfort level and financial back up of a trader.
14. Not having practice
Trading can be developed gradually over years of screen experience and before that attempting to trade all signals/opportunities is one main reason why traders fail.
15.FEAR
The reason for fear is
1.Less capital and trading believing in ones TA and trading skills bcoz of greed.And deep down one knows that trading is a probability game.
2.Over leverage.
3.Not determining the risk before entering a trade.
16.Not placing stop loss
17.Psychological difficulty in Accepting losses
In trading one cannot be always right and even series of small losses[loosing streak] are un avoidable.Learn to accept them as business costs and move on.
18.Hope - Not following the system/plan violating discipline but to hope the markets to reverse in ones direction.

To start with a proper system and waiting for low risk good trade set up opportunity and less risk per trade in the direction of main trend one is most likely to succeed in day trading.

dear jagankris, Great write up :clapping::clapping:

 

[Serious_Trader]

Hi Friends

Had a discussion with ST da regarding success of day traders,less than 3% of total trading population are consistent day traders.

This thread is dedicated to identify the challenges and problems faced in day trading with respect to trading Method ,Psychological Problems and many other dilemma's that lead to such a low success rate.

Idea is to compile the day to day trading challenges and problems in trading that lead to failures of day traders so that they can be learnt and improved in future.

Kindly post your daily problem that leads to failure in trading.....The problems will then be discussed and solved with senior traders

Thanks

No one can solve the Problem....it's only you can solve the problem....

for newbie day trading sucess depends on more than 95% trading Psychology..... we always run for method/AFL which is not secret of Success......... What is my secret? Ok I will write up on Sunday in simple way only for Serious tarders ....

Kindly vote in jagankris thread why you started day tarding?

 

[TraderRavi]

No one can solve the Problem....it's only you can solve the problem....

for newbie day trading sucess depends on more than 95% trading Psychology..... we always run for method/AFL which is not secret of Success......... What is my secret? Ok I will write up on Sunday in simple way only for Serious tarders ....

Kindly vote in jagankris thread why you started day tarding?

but you are swing/positional trader mostly